counting canada’s natural capital · global forest watch canada, whose tireless commit-ment to...

counting canada’snatural capital:

assessing the real value of canada’s boreal ecosystems

Counting Canada’s Natural Capital:


About the Canadian Boreal Initiative

The Canadian Boreal Initiative was created in response to both the opportunities andthreats facing Canada’s Boreal region.

Based in Ottawa, the CBI brings together a wide range of conservation organizations,First Nations, industry leaders and others to create new solutions for Boreal conservationand sustainable development. It supports scientific research to advance thinking onconservation-based planning for the Boreal region, and acts as a catalyst by supporting a variety ofon-the-ground efforts across the Boreal by conservation groups, First Nations and others.

In 2003 the CBI convened the Boreal Leadership Council, an extraordinary group of conservationorganizations, First Nations and resource companies. In concert with the members of the council,the CBI created and launched the Boreal Forest Conservation Framework – a vision for the protectionand sustainable development of Canada’s entire Boreal ecosystem.

www.borealcanada.ca

About the Pembina Institute

The Pembina Institute is an independent, not-for-profit environmentalpolicy research and education organization. Founded in Drayton Valley,Alberta, the Pembina Institute has a multidisciplinary staff of morethan thirty, with offices in Drayton Valley, Calgary, Edmonton, Vancouver, Ottawa and Toronto.

The Pembina Institute’s major policy research and education programs are in the areas of sustainableenergy, climate change, environmental governance, ecological fiscal reform, sustainability indicators,and the environmental impacts of the energy industry.

www.pembina.org

ISBN 0-9733409-3-2

All cover photos: Garth Lenz

Design: The Bytown Group (www.bytowngroup.com)Translation: Les Traductions St-François

Printed on FSC paper.

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COUNTING CANADA’S NATURAL CAPITAL: ASSESSING THE REAL VALUE OF CANADA’S BOREAL ECOSYSTEMS

About the authors

Mark AnielskiMark Anielski is an ecological economist, entrepreneur,professor, author, and president of his own consultingfirm, Anielski Management Inc., which specializes inmeasuring the sustainability and well-being of commu-nities and organizations. Since the early 1990s, Mark has been pioneering the development of natural capitalaccounting systems in Alberta and Canada and is cur-rently a senior adviser to the Chinese Government ongreen gross domestic product (GDP) accounting forChina. He has considerable experience in public policy

analysis of natural resource, energy, royalty, and fiscalpolicy issues in both the public (Alberta Government)and private (GPC—Government Policy Consultants) sectors. His expertise is varied and broad; it includesaccounting for sustainable development, naturalresource accounting, public policy analysis, businessplanning, and performance measurement.

From 2000 to 2003, he served on the National RoundTable on the Environment and the Economy and theEnvironment and Sustainable Development IndicatorsSteering Committee, which developed the first set ofsustainable and environmental performance indicatorsfor Canada. Mark teaches corporate social responsibilityat the University of Alberta’s School of Business. Healso teaches a course in sustainable economics at theBainbridge Graduate Institute near Seattle—the firstMBA program in sustainable business practices andethics. Prior to starting his own consulting practice,Mark spent 14 years as senior policy adviser to the

Alberta Government in the ministries of Treasury,Environment, and Forestry, Lands, and Wildlife, con-ducting economic analysis of environmental policies.From 1995 to 1999, he was part of Alberta Treasury’sperformance measurement team, which designed andimplemented Alberta’s internationally recognized per-formance measurement system (Measuring Up) andthree-year government business planning process.Since leaving the Alberta Government in 1999, hehas dedicated his work life to developing alternative

measures of economic progress, such as the USGenuine Progress Indicator (GPI), the Alberta GPISustainable Well-being Accounting System, EcologicalFootprint Analysis, and other quality-of-life indicatorsystems.

His new Genuine Wealth model, which provides anaccounting framework for measuring and managing thetotal human, social, and natural wealth of communities,is currently in development. Mark is president of theCanadian Society for Ecological Economics, a SeniorFellow with the Oakland-based economic think-tankRedefining Progress, and an associate of the PembinaInstitute for Appropriate Development.

Mark has a master’s degree in Forest Economics andtwo bachelor’s degrees, one in Economics and theother in Forestry, all from the University of Alberta.Mark lives in Edmonton with his wife, Jennifer, andtheir two young daughters.

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Sara WilsonSara Wilson is an independent research and policyanalyst who has worked as a consultant for over fiveyears. She specializes in the areas of socio-economicanalysis of environmental data—notably ecosystemvaluation and full cost accounting techniques, publicpolicy development, ecological fiscal reform, and environmental management. She has compiled, ana-lyzed, and developed social, economic, and environ-mental indicators for provincial accounting purposes,and developed market and non-market valuationsfor ecosystem services such as carbon sequestrationand water quality. Sara has also developed

environmental policy alternatives, including initiativesthat address climate change, pollution prevention,ecosystem conservation, and ecological fiscal reform.

Sara was a lead author on the first provincial GenuineProgress Indicator (GPI), namely the AlbertaSustainability Index—a set of social, environmental,and economic accounts that evaluate the sustainabilityof Alberta’s natural, social, and human capital; and theNova Scotia GPI (i.e., The State of Nova Scotia’sForests: Ecological, Social and Economic Values of Nova Scotia’s Forests). She has also authored anassessment of the measures of community well-being proposed for land-use planning in the CentralCoast, North Coast, and Haida Gwaii/QueenCharlotte Islands; and the GPI accounts on forests and water quality.

Sara has training in environmental economics fromthe Smithsonian Institution in Washington, DC, and a background in economic applications such as cost-benefit analysis and full cost accounting. For example,she has authored The Costs and Benefits of SewageTreatment and Source Control for the Halifax Harbourand The GPI Water Quality Accounts in Nova Scotia.

Sara has provided research and policy developmentservices for the National Round Table on theEnvironment and the Economy, the Pembina Institutefor Appropriate Development, Genuine Progress Indexfor Atlantic Canada, the David Suzuki Foundation,

Rainforest Solutions Project, the Canadian BorealInitiative, and the Green Budget Coalition. As a result,her work includes projects in the forestry, energy,fisheries, agriculture, and mining sectors in Canada.

Sara has a master’s degree in Science in Forestry(Mixed Boreal Forest Disturbance Ecology), a certificate in Economics and Policy Solutions forEcosystem Conservation, and a bachelor’s degree(honours) in International Development Studies and Environmental Geography. Sara currently lives in Victoria, BC, with her husband, Faisal, and their two children.

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Acknowledgements

The authors would like to thank the Canadian BorealInitiative for its generous financial support of thisproject and, specifically, Cathy Wilkinson and MattCarlson for their leadership and guidance throughoutthis two-year project. We would also like to thankMark Winfield of the Pembina Institute for AppropriateDevelopment, who shepherded this project from itsgenesis to its completion. We are also grateful toClaudia Forgas’ usual careful editorial attention.

Our special thanks extend to Peter Lee and staff ofGlobal Forest Watch Canada, whose tireless commit-ment to this project and superb spatial analysis skillsmade it possible for us to complete a preliminaryaccounting of some of the key attributes of the borealregion’s natural wealth. This study would not havebeen possible without the helpful input to an earlierdraft from our advisers, reviewers, and contributors.They include Dr. David W. Schindler (University ofAlberta), Dr. Fiona Schmiegelow (University ofAlberta),Tom Green (Rainforest Solutions Project),Kelvin Hirsch (Canadian Forest Services), Steven Gray(Canadian Forest Services), Dr. Vince St. Louis(University of Alberta), Dr. Nancy Olewiler (SimonFraser University), Heather Johannesen (AtlanticInstitute for Sustainability), Dr. Robert Costanza (GundInstitute for Ecological Economics, University ofVermont), Ed Banfield (Natural Resources Canada),Mark Gillis (Canadian Forest Services), Alexis Morgan

(World Wildlife Fund), Kevin Kavanagh (WorldWildlife Fund), Rick Moll (Statistic Canada), GerryGravel (Statistic Canada), Robert Smith (StatisticCanada), Gary Stewart (Ducks Unlimited Canada),Glenn Mack (Ducks Unlimited Canada), Silvie Forest(Ducks Unlimited Canada), Chris Smith (DucksUnlimited Canada) Dr. Werner Kurz (Ducks UnlimitedCanada), Dr. Casey van Kooten (University of Victoria),Dr. Peter Boxall (University of Alberta), BruceMacnab (Sustainable Forest Research Network,University of Alberta), Dr.Viktor Adamowicz(University of Alberta), and Dr. Josh Farley(University of Vermont).

Several recent publications contributed greatly to thisstudy, including (1) Dr. Nancy Olewiler’s The Value of Natural Capital in Settled Areas of Canada (2004),a report commissioned by Ducks Unlimited Canadawith the support of the Nature Conservancy Canada;(2) Peter Lee’s Boreal Canada: State of the Ecosystem,State of Industry, Emerging Issues and Projections(Report to the National Round Table on theEnvironment and the Economy) (2004), and;(3) the Canadian Boreal Initiative’s The Boreal in theBalance: Securing the Future of Canada’s BorealRegion (2005).

This study is dedicated to Dr. Herman Daly, one of the founders of ecological economics.

Disclaimer

This first beta account of Canada’s boreal region wealth is constrained primarily by the lack of publicly available data orinventory on the physical and qualitative state of the boreal region’s numerous natural capital assets and ecological goodsand services. Notwithstanding, Global Forest Watch Canada’s spatial analysis of the human and industrial ecologicalfootprint or pressures and the natural disturbance regime on the boreal ecosystem made a preliminary boreal wealthaccount possible. This study is clearly only the first step or baseline for a more comprehensive and complete accounting ofthe boreal region’s ecological wealth.

The content of this study is the responsibility of its two authors and does not necessarily reflect the views and opinions ofthose who are acknowledged above.

We made every effort to ensure the accuracy of the information contained in this study at the time of writing. However,the authors advise that we cannot guarantee the information provided herein is complete or accurate and, thus, any personrelying on this study does so at his or her own risk. While the study received some peer review, the review was limited by thetime constraints of our reviewers. The material should thus be viewed as preliminary, and we welcome suggestions forimprovements that can be incorporated in any later edition of the study.

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Table of Contents

FIGURES AND TABLES iii

FOREWORD iv

EXECUTIVE SUMMARY 1

1. INTRODUCTION 71.1 CANADA’S BOREAL REGION 71.2 PURPOSE OF THIS STUDY 9

2. MEASURING THE TOTAL ECONOMIC VALUE OF ECOSYSTEM GOODS AND SERVICES 11

3. METHODOLOGY: THE BOREAL ECOSYSTEM WEALTH ACCOUNTING SYSTEM FRAMEWORK 153.1 THE BEWAS FRAMEWORK AND METHODOLOGIES 15

3.1.1 BEWAS Natural Resource Accounts 183.1.2 Boreal Land Accounts 193.1.3 Boreal Ecosystem Service Accounts 20

3.2 DATA LIMITATIONS 25

4. RESULTS AND SUMMARY: ECONOMIC VALUES OF CANADA’S BOREAL NATURAL CAPITAL AND ECOSYSTEM SERVICES 274.1 BOREAL LAND ACCOUNTS 274.2 BOREAL NATURAL CAPITAL AND ECOSYSTEM SERVICE ACCOUNTS 28

4.2.1 MARKET VALUES OF BOREAL NATURAL CAPITAL 334.2.1.1 Boreal Forest Timber Volume and Market Value 344.2.1.2 Mining, and Oil and Gas Sector Market Value in the Boreal Region 364.2.1.3 Hydroelectric Generation: Market Value in the Boreal Region 37

4.2.2 COSTS OF INDUSTRIAL DEVELOPMENT IN THE BOREAL REGION 374.2.2.1 Government Support Expenditures for the Mining Sector 374.2.2.2 Federal Government Support Expenditures for the Oil and Gas Sector 384.2.2.3 Carcinogens and Toxic Substance Releases by Industrial Sources in the Boreal Region 384.2.2.4 Health Costs Associated with Air Pollutant Releases 404.2.2.5 Cost of Pollution from the Mining Sector 404.2.2.6 Cost of Fossil Fuel Use by the Forest Products Sector 40

4.2.3 THE ECONOMIC VALUES OF BOREAL ECOSYSTEM SERVICES 424.2.3.1 Total Boreal Forest Ecosystem Service Values 42

4.2.3.1.1 Boreal Forest Ecosystem Area and Carbon Estimates 444.2.3.1.2 The Value of Climate Regulation: Carbon Storage 474.2.3.1.3 The Value of Climate Regulation: Carbon Sequestration 48

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4.2.3.1.4 The Value of Boreal Forest Watershed Services 484.2.3.1.5 Soil Stabilization and Erosion Control 494.2.3.1.6 Air Quality 49

4.2.3.2 The Value of Biodiversity 494.2.3.2.1 The Value of Natural Pollination and Pest Control 494.2.3.2.2 The Value of Non-Timber Forest Products 50

4.2.3.3 The Value of the Boreal Region to Aboriginal Peoples and Subsistence Living 504.2.3.4 Passive Values: Conservation of Biodiversity 514.2.3.5 The Value of Boreal Wetland Ecosystem Services 52

4.2.3.5.1 Mineral Wetland (Non-Peatland) Ecosystem Service Values 534.2.3.5.2 Peatland (Organic Wetlands) Ecosystem Service Values 554.2.3.5.3 Total Boreal Wetland Ecosystem Service Values-Summary 584.2.3.6 The Value of Nature-Based Recreation in Canada’s Boreal Region 58

5. CONCLUSIONS 61

6. RECOMMENDATIONS 67

APPENDIX I: TOWARDS AN ACCOUNTING OF BOREAL ECOSYSTEM INTEGRITY 69APPENDIX II: PRESSURES ON CANADA’S BOREAL ECOSYSTEM 72

1. Fragmentation Due to Human Disturbance in the Boreal Region 722. Natural Disturbance in the Boreal Region 723. Mining, and Oil and Gas Industrial Footprint in the Boreal Region 744. Fragmentation Levels of Endangered Species’ Habitat Ranges in the Boreal Region 765. Future Development of Boreal Integrity Analysis 786. Conclusion 78

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Figures and TablesFigure 1: Total Economic Value of Environmental Resources 22Figure 2: Proposed Boreal Ecosystem Wealth Accounting System Framework 24Figure 3: National Pollutant Release Inventory Sites in the Boreal Region, 2002 48Figure 4: Area of Peatlands in Canada’s Boreal Region 67Figure 5: Biological Integrity Continuum 79Figure 6: Pressure-State-Response Model 80Figure 7: Boreal Ecosystem Fragmentation from Forestry, Mining, Oil and Gas, and Other Industrial Linear Disturbances 82Figure 8: Oil and Gas Industrial Footprint Area Coverage in Canada’s Boreal Region, June 2003 84Figure 9: Boreal Fragmentation Map (Red Polygons) within Boreal Woodland Caribou Habitat (Green Line) 86

Table 1: Summary of Natural Capital Economic Values for Canada’s Boreal Region 12Table 2: UN System of Integrated Environmental and Economic Accounting: Flow and Stock

Accounts with Environmental Assets 25Table 3: Alberta Forest Resource Accounts 27Table 4: Boreal Land Accounts Framework 28Table 5: Ecosystem Services and Their Functions 29Table 6: Boreal Ecosystem Service Accounts Structure and Data 31Table 7: Ecosystem Service Accounting Structure 33Table 8: Boreal Land Accounts 36Table 9: Boreal Land Account by Ecozone 37Table 10: Boreal Ecosystem Wealth Natural Capital Accounts, 2002 37Table 11: Market Values of Boreal Natural Capital and Associated Environmental and Societal Costs 41Table 12: Timber Harvest Volume and Area by Province for Canada’s Boreal/Taiga Ecozones, 2002 44Table 13: 2002 NPRI Industrial Air Pollutant Releases Categorized as Carcinogens and Toxics in the Boreal Region 49Table 14: 2002 NPRI Industrial Air Pollutant Releases in the Boreal Region 50Table 15: Boreal Ecosystem Service Value Accounts 51Table 16: Summary of Canada’s Boreal Forest Ecosystem Service Values (Current Estimated Values of

Conserving Natural Capital in Canada’s Boreal Region) 52Table 17: Canada’s Boreal Forest Area and Carbon Storage Estimates by Ecozone 53Table 18: Estimated Values for Forest Ecosystem Carbon Stored in Canada’s Boreal Forests 56Table 19: Area of Mineral Wetlands (Non-Peatland) in Canada’s Boreal Region by Class of Wetland 64Table 20: Average Wetland Ecosystem Service Values from Wetland Valuation Meta-Analysis 65Table 21: Canada’s Boreal Mineral Wetland Ecosystem Service Values 66Table 22: Canada’s Boreal Wetlands by Ecozone-Area and Carbon Content of Peatlands 66Table 23: Summary of Canada’s Boreal Wetland Ecosystem Service Values (Current Estimated Value of

Conserving Natural Capital in Canada’s Boreal Region) 69Table 24: Summary of Natural Capital Economic Values for Canada’s Boreal Region 72Table 25: Area and Percentage of Fragmentation in Canada’s Boreal Region 83Table 26: Fragmentation of Endangered Species’ Habitat Ranges in the Boreal Region 85

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Foreword

“...it lies within the power of human societies to easethe strains we are putting on the nature services of theplanet, while continuing to use them to bring betterliving standards to all. Achieving this, however, willrequire radical changes in the way nature is treated at every level of decision-making and new ways ofcooperation between government, business and civilsociety.The warning signs are there for all of us to see.The future now lies in our hands.”

– Statement issued by the board of directors that oversaw the 2005Millenium Ecosystem Assessment Report, co-chaired by Dr. Robert Watson,chief scientist of The World Bank and Dr. A. H. Zakri, director of the United

Nations University’s Institute of Advanced Studies

At 1.4 billion acres, Canada’s Boreal region is one of the lastand largest intact forests left in the world. Boreal ecosystemsbuffer us against the effects of climate change because itssoils and peatlands form the largest terrestrial carbon store-house on the planet-larger even than the rainforests.

Precisely because boreal forests are such large storehousesfor carbon, forest management practices and changes inboreal forest cover can also be significant sources of green-house gas emissions.Yet the importance of managing forestcarbon reservoirs has received only limited recognition inefforts to combat climate change. Looking beyond the current Kyoto Protocol, we will need every measure at ourdisposal in our global effort to address and adapt to climatechange.That means including all forests in any long-termclimate change regime, and building experience with forestcarbon management even now.

This is only one of many examples of how the true value ofecosystem services are not being adequately integrated intopolicy decisions. As outlined in this report, we are only justbeginning to understand the true value of these services,including flood control, water filtration, climate regulation,and even pest control.

Better yet, we have an opportunity to get it right in Canada’sboreal. We can sustain its natural capital and the ecosystemservices it provides while building other forms of wealthand maintaining community and cultural values.

It’s in response to this unique opportunity that the CanadianBoreal Initiative launched the Boreal Forest ConservationFramework and is working with leading companies, withAboriginal communities and with conservation groupsacross the country to promote a balanced approach to conservation - one that is based on protection of at least half of the landscape and world-class economic developmenton the remaining lands.

Central to the Framework is ensuring that there is thoughtfuland comprehensive, conservation-based land use planningprior to resource management decisions being made. And in order to take this approach effectively, there is a need tohave the most complete information possible about valuesthat are important and possible impacts of decisions underconsideration.

The extraordinary values set out in this report and theBEWAS framework it introduces can only hasten ourprogress. Our hope is that the BEWAS becomes an interna-tional benchmark and an important tool for measuring theconditions and economic values of Canada’s ecosystems, ingeneral, and the Boreal region in particular. An understand-ing of the Boreal region’s true value is essential to addressingimportant questions about how ecosystem conservation cancontinue to contribute to national and global well-being forgenerations to come.

Cathy WilkinsonCanadian Boreal Initiative

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executive summary

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The UN’s Millennium Ecosystem Assessment reportEcosystems and Human Well-being (2005) pointed

to the urgency of diagnosing the conditions of theworld’s ecosystems, conserving their integrity andcapacity to provide sustained ecosystem services forhuman and ecological well-being, and appreciatingtheir true and full economic value.The UN found thatapproximately 60 percent of the ecosystem services of the world’s ecosystems are being degraded or usedunsustainably, including fresh water, capture fisheries,air and water purification, and the regulation ofregional and local climates, natural hazards, and pests.

The report also noted that in many regions, little isknown about the status and economic value of ecosys-tem services. Ironically, despite their importance tohuman well-being, the depletion or degradation ofecosystem services and natural capital, in general, israrely tracked in national economic accounts and isunaccounted for in measures of economic progress,like the gross domestic product (GDP).

The primary purpose of our two-year study is to beginto identify, inventory, and measure the full economicvalue of the many ecological goods and servicesprovided by Canada’s boreal region, which covers 58.5percent of Canada’s land mass. For this purpose, wedeveloped the Boreal Ecosystem Wealth AccountingSystem (BEWAS), a tool for measuring and reporting onthe physical conditions and the full economic value ofthe boreal region’s natural capital and ecosystem services.

We use the term natural capital to refer to the resources,living systems, and ecosystem services provided byEarth’s biosphere, including the ecological systems

that support life. Ecosystem services are produced byinteractions within the dynamic complex of plants,animals, microbes, and physical environmental featuresthat make up an ecosystem.These services are referredto as the benefits that humans obtain from ecosystems.

Canada’s boreal region provides a range of ecosystemgoods and services; these include timber from forests,oil and gas, and hydroelectricity, and the plethora ofecosystem services provided by wetlands and forestssuch as purifying water, regulating climate, and pro-ducing oxygen.While the market benefits of harvestingtimber or extracting oil and gas are measured in termsof their contribution to Canada’s GDP, the value ofmost of the boreal region’s ecosystem services isunnoticed, unconsidered, and unvalued in the GDPand Canada’s national income accounts.There is noline in the nation’s balance sheet for natural capital.

Ignoring the value of Canada’s boreal wealth to thewell-being of the nation is akin to Exxon-Mobil ignoring the volume of oil and gas reserves and annual production in its annual report.Yet this is how nations treat their natural capital, by disregardingits full economic value.

A nation could cut down its forests, deplete its oilreserves, drain its wetlands, and degrade groundwateraquifers, and the primary measure of economicprogress—the GDP—would either ignore the environ-mental depreciation costs of economic growth or, evenworse, treat the depleted natural capital as an addedasset. It seems that only when an ecosystem has beendamaged or irreversibly degraded is its economic valueconsidered, based on the financial costs of replacingno-priced ecosystem services with expensive human-built infrastructure.

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This study reveals the broad range of ecological goodsand services provided by Canada’s boreal region.Thesehave been organized into a BEWAS.The purpose of theBEWAS is to give Canadian decision makers a borealnatural capital “balance sheet” for assessing the sus-tainability, integrity, and full economic value of theboreal region.The balance sheet is broken down intothree main accounting categories:

1. Natural capital accounts—including the stocks, flows,and monetary values (market and non-market values) of forests, mineral and energy resources,fish and wildlife, wetlands and peatlands, andwater resources (lakes, rivers)

2. Land accounts—including an account of land area byland type such as forest land, agricultural land,wetlands, and peatlands

3. Ecosystem service accounts—including atmospheric stabilization; climate stabilization; disturbanceavoidance; water stabilization; water supply; ero-sion control and sediment retention; soil forma-tion; nutrient cycling; waste treatment; pollina-tion; biological control; habitat; raw materials;genetic resources; and recreation and cultural use.As noted, most of these ecosystem services gounaccounted for in conventional economic deci-sion making.

Using the BEWAS as an analytic and reporting frame-work, this study begins to estimate some of theeconomic value of the boreal region’s many ecologicalgoods and services. The purpose of such valuationwork is to provide decision makers with a means ofconsidering the full economic value of the manyecological goods and services of the boreal regionwhen making decisions about its future.

The results of the preliminary economic valuation estimates of the boreal region are summarized in Table 1. We have estimated the annual market values of natural capital extraction and the non-market valuesof ecosystem services in the boreal region for 2002.The market values associated with the use of some ofthe boreal region’s natural capital resources (e.g., timber,minerals, water) are calculated based on estimates ofthe contribution their extraction makes to

Canada’s GDP, adjusted for some of the environmentaland societal costs associated with natural resourceextraction.

The estimated net market value of boreal naturalcapital extraction in the year 2002 is $37.8 billion.If accounted for, boreal natural capital extractionwould equate to 4.2 percent of the value of Canada’sGDP in 2002.The net market value calculation is basedon the contribution to Canada’s GDP from borealtimber harvesting; mineral, oil and gas extraction; andhydroelectric generation ($48.9 billion; or $83.63 perhectare of the boreal ecosystem land base) minus theestimated $11.1 billion in environmental costs (e.g.,air pollution costs) and societal costs (e.g., governmentsubsidies) associated with these industrial activities.

We have also estimated the non-market values of asmall subset of boreal ecosystem services, including theeconomic value of carbon sequestration by forests andpeatlands, nature-related recreation, biodiversity, watersupply, water regulation, pest control, non-timber forestproducts, and Aboriginal subsistence values.

The estimated total non-market value of borealecosystem services in the year 2002 is $93.2 billion(or $159 per hectare of the boreal ecosystem landbase). If accounted for, boreal ecosystem services wouldequate to 8.1 percent of the value of Canada’s GDP in2002.

The ecosystem services with the highest economicvalue per year are (1) flood control and water filteringby peatlands—$77.0 billion; (2) pest control servicesby birds in the boreal forests—$5.4 billion; (3) nature-related activities—$4.5 billion; (4) flood control, waterfiltering, and biodiversity value by non-peatland wet-lands—$3.4 billion; and (5) net carbon sequestrationby the boreal forest-$1.85 billion.

When we compare the market and non-market valuesfor the year 2002, the total non-market value ofboreal ecosystem services is 2.5 times greater thanthe net market value of boreal natural capitalextraction. This result is significant. It suggests that the ecological and socio-economic benefits of borealecosystem services, in their current state, may besignificantly greater than the market values derivedfrom current industrial development—forestry, oiland gas, mining, and hydroelectric energy—combined.


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Note: Market values are denoted in blue; non-market values in green and environmental/societal costs in brown.

a These are either environmental or societal costs associated with market-based activities (e.g., forest industry operations).

b A GDP chained, implicit price index was used throughout the study to standardize to 2002 dollars.

c Based on European Union air pollution cost estimates for SO2, NOx, PM2.5, and VOC for 2002.

Table 1: Summary of Natural Capital Economic Values for Canada’s Boreal Region

Boreal Ecosystem Wealth Monetary Economic Values and Regrettable Costsa

Natural Capital Accounts (2002$ per annum)b

Forests Market values:• $14.9 billion in estimated market value of forestry-related GDP in

the boreal region (est. 2002)Costs:• $150 million in estimated cost of carbon emissions from forest

industry activity in the boreal region (deduction against forestry-related GDP)

Non-market values:• $5.4 billion in value of pest control services by birds• $4.5 billion for nature-related activities• $1.85 billion for annual net carbon sequestration (excludes peatlands)• $575 million in subsistence value for Aboriginal peoples• $79 million in non-timber forest products• $18 million for watershed service (i.e., municipal water use)• $12 million for passive conservation value

Wetlands and peatlands Non-market values:• $77.0 billion for flood control and water filtering by peatlands only• $3.4 billion for flood control, water filtering, and biodiversity value

by non-peatland wetlands• $383 million for estimated annual replacement cost value of

peatlands sequestering carbon

Minerals and subsoil assets Market values:• $14.5 billion in GDP from mining, and oil and gas industrial

activities in the boreal region (est. 2002)Costs:• $541 million in federal government expenditures as estimated

subsidies to oil and gas sector in the boreal region• $474 million in government expenditures as estimated subsidies

to mining sector in the boreal region

Water resources Market values:• $19.5 billion in GDP for hydroelectric generation from dams and

reservoirs in the Boreal Shield ecozone (est. 2002)

Waste production (emissions to air, land, Costs:and water) • $9.9 billion in estimated air pollution costs to human healthc

TOTAL market values (forestry, $48.9 billion

mining, oil and gas industrial activity, and

hydroelectric generation)

Less cost of pollution and subsidies:• Air pollution costs - $9.9 billion• Government subsidies to mining sector - $474 million• Federal government subsidies to oil and gas sector - $541 million• Forest sector carbon emission costs - $150 million

NET market value of boreal natural capital extraction $37.8 billion

TOTAL non-market value of boreal ecosystem services $93.2 billion

RATIO of non-market to market values 2.5



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Key FindingsThe following are the key highlights of our study and analysis.

The results of the estimated net market value of boreal natural capital extraction for 2002 include:

• Canada’s boreal forest contributed an estimated$14.9 billion to Canada’s GDP from harvestedtimber (based on estimates that 60 percent ofCanada’s forest industry activity occurs in theboreal region).

• Mining, and oil and gas industrial activities in the boreal region contributed an estimated $14.5 billion to Canada’s GDP.

• Hydroelectric generation from dams and reser-voirs in the Boreal Shield ecozone contributed an estimated $19.5 billion to Canada’s GDP.

• There is an estimated $11.1 billion in air pollutionand government subsidy costs associated withforestry and mining sector activities; costs thatshould, in principle, be deducted from the marketGDP value as environmental and social costs ofdevelopment.

The results of the estimated total non-market value of boreal ecosystem services for 2002 include:

Forests• The annual non-market boreal forest ecosystem

service values are estimated at $12.4 billion, or$51.24 per hectare per year for 2002; this figureincludes an estimated value of $1.85 billion forthe annual net carbon sequestered by forests.

• Like a bank account, Canada’s boreal forests and peat-lands represent a massive storehouse of carbon.Anestimated 67 billion tonnes of carbon are stored inthe boreal region-the equivalent of 303 years ofCanada’s total 2002 carbon emissions, or 7.8 years of the world’s total carbon emissions in the year2000. How much is this stored carbon worth to theworld? Munich Re, one of the world’s largest rein-surance companies, has estimated that the cost to theglobal insurance industry of continued increases inglobal carbon emissions to the atmosphere couldreach US$304 billion per year by the end of thedecade. Using this estimate as a proxy for the valueof maintaining carbon storehouses like the borealregion would suggest a value of carbon at US$46 pertonne of carbon (based on total global carbon emis-sions in the year 2000). Using Munich Re’s carbonvalue estimates would place the value of the currenttotal carbon stored in Canada’s boreal “carbon bankaccount” at $3.7 trillion.

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Wetlands and Peatlands

• The annual non-market boreal wetland and peat-land ecosystem service values (flood control, waterfiltering, and biodiversity value) are estimated at$80.4 billion ($934 per hectare of wetland andpeatland combined per year), plus $383 millionper year for carbon sequestration by peatlands.

• In terms of stock values, 83.2 million hectares of peatland in Canada’s boreal region hold an estimated 19.5 billion tonnes of carbon worth an estimated $349 billion (i.e., carbon stock value; $4,195 per hectare).

Nature-Related Recreation2

• Approximately 6.1 million Canadians participatein nature-related activities per year in Canada’sboreal region, worth an estimated $4.5 billion($3.8 billion in total nature-related-activity expen-ditures by participants plus $654.7 million peryear in economic value; included in annual forestecosystem total value).

• Based on input/output modelling, the above borealregion expenditures would have the following eco-nomic impact on Canada’s economy: $5.7 billionon gross business production, $4.0 billion on GDP,$1.8 billion in government taxes and revenue, and$1.9 billion in personal income generated by64,500 sustained jobs.

While our account of the boreal region is preliminary,it reveals the importance of measuring the full rangeof ecological and social values of ecosystems toCanadians.The accounts also begin to show that theincreasing pressures on boreal ecosystem integrityfrom human and industrial development couldpotentially threaten the future economic well-being of Canadians and global citizens.

Issues for CanadiansThe results of our study suggest that Canadians haveimportant issues to contemplate, namely:

• What level of development would be acceptable inorder to minimize further fragmentation, loss ofintact boreal ecosystems, and the degree of damageto ecosystem function?

• How much of the current intact boreal ecosystemsshould be protected from future development?

• What are the real economic costs and benefits toCanadians if industrial development of the borealregion is forgone?

• What is the true value of conserving the integrityand full functional capacity of the boreal region’secosystems for current and future generations ofCanadians and global citizens?

• Are other nations willing to pay Canada for pre-serving the boreal region’s ecological goods andservices?

• Should Canada adopt a more precautionary andconservative approach to decision making withrespect to the boreal region by ensuring ecosystemintegrity and optimum ecosystem service capacityare the primary objectives of future land-use plan-ning and development?

In order to answer these questions and make well-informed decisions, all levels of government (federal,provincial, and municipal), working with industry andlocal communities, need to make a commitment to:

• Develop a system of natural capital accounting,such as the BEWAS, to guide land-use planning,resource management, and economic developmentpolicies. This accounting system would include acomprehensive and nationally coordinated inven-tory of boreal natural capital;

• Incorporate accounts of natural capital and ecolog-ical goods and services in national and provincialincome accounts to guide economic, fiscal, andmonetary policies; and

• Provide full cost accounting of the social and environmental costs associated with natural capitaldevelopment and total economic valuation of nat-ural capital and ecosystem services.

We consider our estimates of ecosystem service valuesto be both incomplete and conservative.The primaryshortcoming of our BEWAS estimates for 2002 is thelack of data on both natural capital resources and thecondition of ecosystem services and functions. Forexample, there are currently no data available on theactual volume of timber harvested from the borealregion or on the volume of oil and gas extracted.


2 Nature-related recreation is reported as a forest ecosystem value in Table 1.



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More importantly, there are currently no data tomeasure the integrity or health of boreal ecosystemsdue to a lack of information on ecosystem functions.

Similarly, while it may be possible to account for thearea of wetlands in the boreal region, we still knowvery little about the current state of integrity of theirnumerous ecological goods and services.Yet, we dohave evidence of significant linear disturbance in muchof the boreal region due to oil and gas, mining, andforestry development that has resulted in significantterrestrial forest ecosystem fragmentation.The long-term implications, both economic and in terms ofecological sustainability, of this fragmentation are sub-stantial but poorly understood.

Notwithstanding these limitations, our conservativeeconomic value estimates provide an important bench-mark for comparing the market values of natural capitalextraction with the non-market values of ecosystemservices in making trade-offs between further industri-al development and ecological wealth preservation.

RecommendationsIdeally, a robust BEWAS will track and report on thechanges in the condition of Canada’s boreal regionover time. A national commitment to more compre-hensive natural capital inventories is required in orderto complete a BEWAS. Furthermore, the integrationand development of the region’s true and full economicvalue in policy and land-use decision-making is criticalto protect the existing natural capital and ecosystemfunctions throughout the boreal region.

Our recommendations identify important roles thatfederal and provincial governments, local representa-tives, industry, land-use planners, resource managers,scientists, Aboriginal communities, and conservation groups can play in partnership:

1. Given the absence of a complete inventory of thestocks and consumption of timber, minerals, carbon,wetlands, marine resources, wildlife, and fisheriesin the boreal region, we recommend that a compre-hensive inventory of the area be completed andmade publicly available. National, provincial, andlocal boreal region accounts should be developedincluding physical stock and flow accounts

(inventory) of natural capital assets and ecosystemservices.These accounts should include informa-tion on the following: annual average growth rateof timber; fires (in terms of both area and volumelost); insect infestation; carbon sequestration byforests and wetlands; fisheries; and annual waterflow rates in rivers and groundwater aquifers.Finally, these accounts should include an account of the state of ecosystem services in order to trackor measure changes in ecosystem functionalityand their respective service values.

2. We recommend that the specific effects of eachtype of human disturbance be identified, tracked,and monitored to determine the change in eco-nomic value of the boreal region’s ecosystem services.

3. We recommend that economic values for ecosystemservices be further developed and adopted by alljurisdictions for resource and land-use planning,especially at the municipal and provincial levelswhere changes in land-use and resource planningare made.

4. Our analysis found that the total non-market valueof boreal ecosystem services is 2.5 times greaterthan the net market value of boreal natural capitalextraction.This result indicates that an economicargument exists that supports a significant expan-sion of the network of protected areas in theboreal region, consistent with the Boreal ForestConservation Framework’s vision for sustainingthe integrity of the region. We recommend that apolicy be developed to expand the network ofprotected areas in the boreal region that wouldserve as an investment in the natural capital of theboreal region for the benefit of current and futuregenerations of Canadians and global citizens.

5. We recommend that in order to ensure theoptimum value of ecosystem services is recog-nized and conserved, resource management andland-use decisions need to account for impacts(i.e., costs and benefits) on ecosystem services and the overall state of the region’s natural capital.The Boreal Forest Conservation Framework’svision of conservation-based resource manage-ment practices should be implemented in order to minimize costs and maximize local ecologicalvalues.



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C anada’s boreal region represents one of theworld’s most important ecological treasures. It

is one of the last large areas in the world that stillsupports a full suite of native species in large, connectedecosystems shaped by powerful natural forces likewind and fire. There is growing recognition of theboreal region’s natural capital—the resources, living systems, and ecosystem services provided by Earth’sbiosphere, including the ecological systems that supportlife—and its role in providing for the well-being ofCanadians and life everywhere on the planet.

According to the UN’s Millennium EcosystemAssessment report Ecosystems and Human Well-being (2005),ecosystem services3 are the benefits people obtain fromecosystems.These benefits include the following: provision-ing services such as food, water, timber, and fibre; regulatingservices that affect climate, floods, disease, wastes, andwater quality; cultural services that provide recreational, aes-thetic, and spiritual value; and supporting services such as soilformation, photosynthesis, and nutrient cycling.4

While ecosystem services are fundamental to humanwell-being, their economic value is not taken intoaccount in national measures of economic progress,such as the gross domestic product (GDP), and indecisions on land-use planning and industrial develop-ment. Indeed, the ecological integrity of Canada’s boreal

region, and thus its services, can diminish whileGDP rises, indicating that Canada’s financial wealth isincreasing without consideration for the cost of losses innatural capital and ecosystem services.

Information on the distribution, status, and economicvalue of most ecosystem services is poor, particularlyfor the boreal region. In addition, the depletion of natural capital in the boreal region is not accountedfor in Canada’s GDP and national income accounts.

This study is an attempt to bring to light a full accountof the state and total economic value of Canada’s borealecosystem services and natural capital assets. Such anaccount of Canada’s natural capital, for an area as vastand important as the boreal region (which coversroughly 58.5 percent of Canada’s land mass), is vital to ensure the long-term sustainability, integrity, andprudent stewardship of the boreal region for the well-being of both Canada and the world.

The boreal region (Boreas comes from the Greek god of the North Wind) is Canada’s largest ecoregion,covering over 58.5 percent of the country, or 584million hectares (5.8 million square kilometres) fromNewfoundland and Labrador to the Yukon.5 Canada hasthe second-largest area of northern forests, after Russia.

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1.1 Canada’s Boreal Region

3 An ecosystem can be defined as “a dynamic complex of plants, animals, microbes, and physical environmental features that interact with one another.” (from theMillennium Ecosystem Assessment: Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry. Synthesis Report).

4 United Nations, Millennium Ecosystem Assessment Synthesis Report (New York: United Nations, 2005), p. 9.5 Our estimate of the size of the boreal region comes from Canada's National Forest Inventory (CanFI), http://nfi.cfs.nrcan.gc.ca/canfi/data/ecozones-small_e.html.

We used the CanFI data because (a) it is currently the most widely acceptable data on the boreal region, and (b) it ensures consistency for the purposes of ouraccounting study. We are aware that there is a debate about the true size of the boreal region. For example, the Canadian Boreal Initiative (CBI) uses an estimate of574 million hectares, which is based on a new definition of the boreal region.The new definition results in a moderately larger boreal land mass than the definitiondeveloped by Stan Rowe, because it includes portions of Rowe's Great Lakes—St Lawrence region and some of what he had identified as tundra.The CBI figureexcludes the southernmost part of the Boreal Shield, known as the Algonquin—Lake Nipissing ecoregion, because the dominant vegetation, which includes speciessuch as sugar maple, is not characteristic of the boreal region. Other ecoregions along the southern fringe of the boreal region also contain some uncharacteristicvegetation, although not to such an extent as the Algonquin—Lake Nipissing ecoregion.The line forming the boreal boundary is best regarded as a gradient. As aresult, the boundary may adjust based on future analyses. See J. S. Rowe. Forest Regions of Canada (Ottawa: Department of the Environment, Canadian Forestry Service,1972), Publication No.1300.The issue of discrepancies between boreal region area estimates must ultimately be resolved to ensure consistency in future borealecosystem wealth accounting.



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Canada’s boreal forest is one of the three largest “frontier forests” remaining on the planet.6 This regionincludes 90 percent of Canada’s remaining large intactforests, and 25 percent of the world’s remaining largeintact forests.7 In addition, 35 percent of the world’swetlands are in Canada’s boreal region8; and 40 percentof Canada’s wetlands designated as internationallyimportant are located in its boreal region.9

Globally, the boreal region is important because itprovides many essential goods and services. It filtersmillions of litres of water on an average day; storescarbon; produces oxygen; rebuilds soil and restoresnutrients; holds back floodwaters; releases neededwater into rivers, streams, and oceans; and providesfood and shelter for hundreds of species. The borealforest teems with life, including soil microbes and soilfungi; tiny fragile lichens; small colourful songbirds;and some of the world’s largest remaining populationsof woodland caribou, wolves, and bears. A recent studydetermined that up to three billion birds breed inNorth America’s boreal region each year, which onlyemphasizes its importance to the continent’s wildlife.10

The boreal region contributes to the economic well-being of all Canadians. It is richly endowed with timber,minerals, and oil and gas that are a significant part ofCanada’s GDP. A recent estimate of the GDP generated by industrial activity in the boreal region is $64 billion,or 10 percent of Canada’s GDP.11

In Canada in 2002, over 60 percent of forestry activityby area harvested and over 50 percent of forestry activity

by volume harvested are estimated to occur in the borealregion;12 these activities support over 7,000 forest-relatedenterprises in the region and provide jobs for 395,000people in logging and related industries.

Canada’s total mining, and oil and gas extractionactivities contributed $65.3 billion, or 5.6 percent, toCanada’s GDP in 2002.13 An estimated 80 percent oftotal mining activity14 and 37 percent of petroleumand natural gas extraction activity15 occur in the borealregion. Direct employment for 2002 in mining was52,300, including quarrying aggregates such as sandand gravel, less than half of 1 percent of nationalemployment.16

The industrial footprints of forestry, mining, oil and gas,road building, and agricultural development are grow-ing rapidly, particularly along the southern fringes ofCanada’s vast boreal region. Since the late 1980s, over$13 billion of new and expanded pulp mills and orient-ed strand board mills have been constructed to exploitthe previously untapped volumes of timber to feed agrowing export demand for forest products, largely des-tined for US markets.17 Large-scale clear-cutting, and oiland gas exploration and extraction, which have laiddown thousands of kilometres of seismic lines, haveseverely fragmented wildlife habitat and Aboriginal tra-ditional lands used for food gathering, trapping, andhunting.

Overall, the boreal region has only 3 percent of its areaconverted to other land uses. However, 31 percent of itsremaining area has been accessed by industrial develop-

6 The other two are in Russia and Brazil.7 Peter Lee. Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections (Report to the National Round Table on the Environment and the Economy) (Ottawa: National

Round Table on the Environment and the Economy, 2004).8 Ibid., p. 7.9 Designated by the Ramsar Convention on Wetlands, and retrieved September 2, 2005 from the Ramsar website http://www.ramsar.org.10 Peter Blancher and Jeffrey Wells. The Boreal Forest Region: North America's Bird Nursery (Ottawa: Canadian Boreal Initiative and Boreal Songbird Initiative, 2005),

http://www.bsc-eoc.org/borealnurseryrpt.html.11 N. Urquizo, J. Bastedo,T. Brydges, and H. Shear. Ecological Assessment of the Boreal Shield Ecozone (Ottawa: Environment Canada, Indicators and Assessment Office,

Environmental Conservation Service, 2000).This source was referenced in Lee, Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections. We do nothave any more recent GDP estimates specific to the boreal region. As a result, we had to estimate these figures based on the single existing estimate from a 2000study that uses 1991 GDP data.

12 Canadian Boreal Initiative. The Boreal in the Balance: Securing the Future of Canada's Boreal Region (Ottawa: Canadian Boreal Initiative, 2005), p. 18.This estimate was made forCBI by Global Forest Watch Canada based on spatial analysis of the area of the boreal forest that was harvested in 2002. On an area basis, the boreal forest harvestarea represents 61.2 percent of Canada's total estimated forest land harvested in 2002. However, in terms of volume of timber harvested, the boreal forest harvestrepresents only 50.3 percent of Canada's 2002 timber harvest. Original harvest area and volume data for Canada is drawn from the National Forest DatabaseProgram, http://www.nfdp.ccfm.org/compendium/harvest/summary_e.php.

13 Statistics Canada. Gross Domestic Product at Basic Prices, Primary Industries (Ottawa: Statistics Canada, 2005), http://www.statcan.ca/english/Pgdb/prim03.htm. Percentageswere estimated based on the ratio of mining, and oil and gas extraction GDP contribution to Canada's total GDP in 2002.

14 MiningWatch Canada. The Boreal Below: Mining Issues and Activities in Canada's Boreal Forest Region (Ottawa: MiningWatch Canada, 2001), http://www.miningwatch.ca(accessed February 2004).

15 Based on spatial analysis and interpretation of petroleum and natural gas active (“non-abandoned wells”) producing wells as of June 2003 by Global Forest WatchCanada, March 30, 2005.

16 Peter Lee. Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections (Report to the National Round Table on the Environment and the Economy) (Ottawa: NationalRound Table on the Environment and the Economy, 2004).

17 Retrieved May10, 2005 from Boreal Forest Network website http://www.borealnet.org.


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ment.Approximately 29 percent of Canada’s boreal foresthas been allocated to forest companies through licencesand tenure,18 while less than 10 percent of the region isstrictly protected from development, and there is noconsistent application of sustainable resource developmentmanagement practices.

The absence of a proper account for the boreal region as anatural capital asset is unfortunate given that this preciousnetwork of ecosystems is subject to increasing industrialdevelopment pressures.These pressures add to the poten-tial loss and degradation of natural capital based on pasthuman land use and exploitation of resources.

The conversion of ecosystems for other uses, includingforestry, mining and energy industries, residentialdevelopment, roads, and other industrial development,has led to the loss of ecological connectivity andecosystem services. Resource management decisionsand investment decisions are largely influenced byconsideration of the monetary costs and benefitsassociated with the market values of natural capital,which tend to favour forestry, agriculture, and miningactivities. Unfortunately, these activities affect thenon-market values of ecosystem services. However,because ecosystem services have not been given amarket value, rarely have they been accounted for inresource policy decisions.

The primary questions this study set out to answerwere the following:

• What is the full range of ecological goods andservices that Canada’s boreal region provides forthe well-being of Canadians and global citizens?

• What are the total economic values (both marketand non-market values) of the boreal region’secological goods and services?

• How can Canada develop a system to account forand report on the state of the natural capital assetsand ecological integrity of its boreal region?

This study presents the Boreal Ecosystem WealthAccounting System (BEWAS), the first beta-model,or framework, of its kind for the long-term develop-ment of a natural capital accounting system forCanada’s boreal region.The BEWAS considers both the physical state and economic value of the borealregion’s natural capital assets. Using physical inventorydata along with spatial data (e.g., satellite imagery andancillary data such as roads, petroleum well sites, pop-ulated places), we were able to construct a first, albeitpreliminary, account.

We hope that this work ultimately leads to a nationalcommitment by various levels of government alongwith non-profit organizations and industries workingin the boreal region, to the development of a compre-hensive boreal ecosystem and natural capital account-ing system for Canada. Such an account should ulti-mately inform Canadians on the ongoing state and sus-tainability of Canada’s boreal region as a natural capitalpatrimony.

This study represents a step towards such a desiredoutcome. It establishes a baseline against whichgenuine progress towards sustainability of the borealregion can be measured and managed. Ultimately, itspurpose is to ensure that the integrity of the borealregion is maintained without any regrettable net lossto its wide range of ecological goods and services.


1.2 Purpose of This Study

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18 Canadian Boreal Initiative. The Boreal in the Balance, (Ottawa: Canadian Boreal Initiative, 2005) p. 18.



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measuring the total economic value of ecosystem goods and services

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19 The most famous example of this kind of analysis is by Robert Costanza, an ecological economist, and his colleagues who derived an estimate of the ecological servicevalues of the earth's various ecosystems at US$33 trillion per year in 1997, more than double the World's GDP at the time. See Robert Costanza, Ralph d'Arge, Rudolfde Groot, Stephen Farber, Monica Grasso, Bruce Hannon, Karin Limburg, Shahid Naeem, Robert V. O'Neill, Jose Paruelo, Robert G. Raskin, Paul Sutton, and Marjan vanden Belt. “The Value of the World's Ecosystem Services and Natural Capital,” Ecological Economics 25 (1998): pp. 3-15. Note, this article first appeared in Nature 38, no. 15(1997): pp. 253-259 and was reprinted in Ecological Economics as part of a special issue dedicated to the debate on valuing ecosystem services.

20 According to the UN's conventions on environmental and natural capital accounting (SEEA 2003), the benefits of ecological functions are considered in three cate-gories: resource functions, sink functions, and service functions.These benefits are divided into two broad categories: use values and non-use values.

21 United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, and World Bank. Handbook ofNational Accounting, Integrated Environmental and Economic Accounting 2003 (New York: United Nations, European Commission, International Monetary Fund, Organisation forEconomic Co-operation and Development, and World Bank, 2003), Section 7.35, p. 251.

22 Ibid., Section 7.36, p. 251.23 Ibid., Section 7.37, p. 251.

Valuing natural capital, including ecosystem services,in monetary terms poses methodological challenges.

Many efforts have been made by some ecological andenvironmental economists to derive non-market valuesfor ecosystem services.19

The conventional economic valuation would attemptto assess the total economic value (TEV) of an envi-ronmental resource or ecosystem according to use values and non-use values (see Figure 1).20 Use valuesinclude direct use values, market-based values, andecological function values; non-use values includeoption values, quasi-option values, vicarious-use values, bequest values, and existence values.

Use values include both direct and indirect usevalues.21 Direct use values (or benefits) are derivedfrom the direct use of natural resources as materials,energy, or space for input into human activities.22

These benefits include the market value of forestry,agriculture, and mining activities, which are generallymeasured as a GDP value (i.e., the total market value of all goods and services produced by the sector in the economy).This valuation approach is used in theBEWAS to reach the market value of the forestry,mining, oil and gas, and hydroelectric sectors thatoperate in the boreal region. Direct use values alsoinclude other market activities such as commercialfishing, guided fishing trips, boat tours, and non-market activities such as recreation or nature-relatedactivities); of these, only the value of nature-relatedactivities is accounted for in the BEWAS.

Some economists have also described indirect use values (or benefits) (not shown in Figure 1), whichare values that do not change the physical characteristicsof the environment and are sometimes referred toas “non-consumptive” (e.g., the amenity value of alandscape).

Ecological function values (or benefits) are providedby the ecosystem services and functions of a naturalresource.They describe the indirect ecological valuederived from the interconnectedness of species througha variety of food chain and nutrient cycles. Ecologicalfunction benefits may include waste assimilationfunctions and life support functions, such as theprovision of clean air, water, and other resources.

Non-use values (or benefits) comprise option values,quasi-option values, vicarious-use values, bequest val-ues, and existence values. Option values (or benefits)are derived from the continued existence of environ-mental elements that may one day provide benefits forthose currently living and for future generations.23

Quasi-option values (or benefits) refer to the welfareobtained from the opportunity to get better informa-tion by delaying a decision that may result in irre-versible environmental damage. Vicarious-use values(or benefits are gained by people from the knowledgethat others may be enjoying use of a natural environment, for instance, for recreational activities,commercial activities.



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Bequest values (or benefits) are derived from thecontinued existence of environmental elementsbecause they may one day provide benefits for futuregenerations.24 In addition to these non-use benefits,an environmental entity may have existence values (or benefits); that is, an entity—such as a rare speciesor a special ecosystem—may appear to be of no use to humans now or in the future, but it is beneficial to maintain its existence for the simple satisfaction that the community derives from knowing that itexists (for ethical reasons).25

For the purposes of accounting for the boreal region’snatural capital and ecosystem functions, the UNHandbook of National Accounting, Integrated Environmental andEconomic Accounting 2003 provides detailed guidelines on

how to construct both physical and monetary accountsof natural capital.26 These guidelines were used, for themost part, in the development of the BEWAS. Whilethe Handbook is useful for accounting for natural capitalsuch as forests, wetlands, land, and water, it is lessclear on how to practically develop accounts forecosystem functions.The Handbook notes, “A compre-hensive measurement of the environmental servicesprovided by ecosystems is conceptually possible butnot comprehensively covered by the Handbook. Someaccounting for the appearance and disappearance ofecosystem features may be possible in a limited formof account.”27 Therefore, this study is pioneering in the conceptual design and practical construction ofaccounting for ecosystem services, in general, and for Canada’s boreal region, specifically.

24 Ibid.25 Ibid.26 The Handbook is the result of a multi-stakeholder and collaborative effort involving the United Nations, the European Commission, the International Monetary Fund,

Organisation for Economic Co-operation and Development (OECD), and the World Bank, as well as through the participation of several governments from variousnations.

27 United Nations, European Commission, International Monetary Fund , Organization for Economic Co-operation and Development, and the World Bank. 2003.Handbook of National Accounting: Integrated Environmental and Economic Accounting 2003, Section 7.43, p. 269 retrieved September 2, 2005 from the United Nations websitehttp://unstats.un.org/unsd/envAccounting/seea.htm.The handbook is also known as SEEA (Integrated Environmental and Economic Accounting).There are anumber of different methods for calculating economic rents outlined in the UN SEEA handbook on pp. 276-278.

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In terms of offering an approach to valu-ing natural resources, the Handbook pro-vides useful international environmentalaccounting guidelines for Canada to con-sider with respect to accounting for theboreal region’s natural capital. Naturalcapital is valued in terms of the marketprice of extraction of a natural resourceasset or the market value of services to theeconomy as natural resources are used.

These values are conventionally measuredin terms of economic rent—the value of thecapital service flows rendered by a naturalresource or simply the between-the-market price that could be earned forusing a natural capital asset (e.g., timber,oil, or fish) and the factor costs ofproduction, including an allowance forreturns to invested capital.28

Economic rent, in the case of a publicnatural capital asset, is effectively the netreturn to provincial governments (withsome exceptions) as owners of most nat-ural capital assets. Economic rent valuescan be applied to both the stock (e.g.,total stock of standing timber in a forest)and flows (e.g., value of the annualtimber harvest) of natural capital use.29

Economic rent estimations are onlyapplicable where markets exist for naturalresources such as timber, oil and gas,minerals, hydroelectric power, andcommercial fish production.

For the purposes of the BEWAS, eco-nomic rent estimates are not possiblegiven the lack of data necessary to calcu-late economic rent. Instead, the GDP ofeach market-valued natural capital asset bysector (e.g., forestry, mining, petroleum)are used as a crude proxy for the market

value of natural capital consumed inindustrial production.

In the case of market-based natural cap-ital assets, such as timber, oil and gas,and minerals, the valuation in monetaryterms is rather straightforward. Marketsreveal the price or monetary value of anatural capital asset. For example, ahectare of land could be valued interms of both the market value ofstanding timber, and subsoil oil and gas reserves. It is important to note thatthe market price does not reflect thetrue cost of extraction and processingof these goods.This is because, in thecase of ecosystem services, there areno markets in which their monetary values are revealed.

Economists have attempted to estimatemonetary values for a variety of non-market ecosystem services using variousmethodological approaches (e.g., survey-ing the public’s willingness to pay forvarious ecosystem services or assessingthe actual costs of replacing or repairingdamaged ecosystem functions).

While useful, these estimates often reveala wide range of monetary values forsimilar ecosystem functions (or non-market natural capital), which can leadto confusion in interpreting the mostappropriate values to use in makingtrade-off decisions with market valuesof natural capital.

For the purposes of this study, the valuesestimated for the boreal region are pri-marily based on use benefits—bothdirect use values and ecological functionvalues. Estimates of non-use values are


The Natural CapitalAccounting Challenge

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28 Ibid., Section 2.136, p. 53.29 In the case of valuing the stock of a natural capital asset, like timber, the sum total of a discounted value (i.e., net

present value, or NPV) of a stream of benefits over the life of the natural capital asset is calculated.

Valuing natural capital, includingecosystem services, in monetary termsposes methodological challenges.Many efforts have been made bysome ecological and environmentaleconomists to derive non-marketvalues for ecosystem services.

For the purposes of accounting forthe boreal region’s natural capitaland ecosystem functions, the UNHandbook of National Accounting,Integrated Environmental andEconomic Accounting 2003 providesdetailed guidelines on how to con-struct both physical and monetaryaccounts of natural capital.

While the Handbook is useful foraccounting for natural capital suchas forests, wetlands, land, andwater, it is less clear on how topractically develop accounts forecosystem functions.

Therefore, this study is pioneering inthe conceptual design and practicalconstruction of accounting forecosystem services, in general,and for Canada’s boreal region,specifically.



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beyond the scope of this study due to the lack ofexisting research and valuation studies. Thus, ourstudy provides an incomplete accounting of the totaleconomic value of the boreal region’s natural wealth.

As the Handbook points out, “Actually accounting for eachand every environmental asset would require enormousamounts of information, much, if not most, of whichwill not exist in most countries.”30 Thus, our attempt ateven a partial construction of a BEWAS for the borealregion is ambitious and daunting, and its completionis years away.

How then should we proceed in the absence of clearecosystem service accounting guidelines? There isconsiderable debate in the academic and professionalresource accounting community about the bestapproach to ecosystem service accounting. Some

experts argue that it is best to develop non-market values, while others would like to see more rigorousqualitative measures of ecosystem integrity measure-ment.31 Since ecosystem services are not traded infinancial markets and thus have no “revealed” marketvalue, proxy values are required for these services.

There are many non-market valuation techniques atour disposal, and our results show the range of valueestimates that are possible. More often, the real valueof intact ecosystems may only be fully revealed whenan ecosystem (e.g., a wetland) has been irreparablydegraded or damaged by industrial development. Forexample, replacement costs or expenditures on builtinfrastructure intended to replace lost or damagedecosystem services may act as proxies of their onceintact value.

30 United Nations et al., Handbook of National Accounting: Integrated Environmental and Economic Accounting, Section 7.40, p. 251.31 Ecosystem integrity is defined as “the soundness or wholeness of the processes and organisms composing the ecosystem.To maintain ecological integrity one must

maintain functioning, self-sustaining ecosystems with characteristics similar to the original ones.” See An Ecosystem Spatial Analysis for Haida Gwaii, Central Coast, and North CoastBC April 2004 (Victoria, BC: Coast Information Team, 2004), http://citbc.org/c-esa-fin-04may04.pdf. Statistics Canada has considered possible approaches to ecosystemservices accounting and suggests that ecosystems are best evaluated in primarily physical terms and not monetary.Their rationale is that, for example,the evaluation ofair quality and other ecosystem outcomes is inherently a question of physical measurement. However, physical measurement, as noted above, is complicated by the verycomplexity of dynamic ecosystems, requiring many indicators of ecosystem functions in order to provide a full picture of ecosystem integrity.

Direct Use Values

• Commercialforestry

• Commercial mining

• Commercial agriculture

• Commercial fishing, hunting,and trapping

• Recreational fishing and boating

• Nature-relatedoutdoor activities

Ecological Function Values

• Nutrient storageand cycling

• Atmosphere gasand climate regulation

• Waste treatmentand assimilation

• Biological control• Habitat and

refugia• Biodiversity

maintenance• Habitat protection

Option Values

The benefit ofmaintainingthe right to useresources with-out necessarilydoing so.

Quasi-OptionValues

The welfareobtained fromthe opportunityto get betterinformation by delaying adecision thatmay result inirreversibleenvironmentaldamage.

Vicarious UseValues

Knowing othersare enjoyingnature’s values.

Non-Use Values

Total Economic Value (TEV)The total economic value of an environmental resource is

generally considered to comprise both the use values as wellas non-use values generated by that resource.

Bequest Values

The maintenanceof environmentalattributes for thebenefit of futuregenerations.

Existence Values

The satisfactionthe communityderives by know-ing that a certainthing (e.g. rarespecies) stillexists.

Figure 1: Total Economic Value of Environmental Resources

Source: retrieved September 2, 2005 from National Ocean’s website http://www.oceans.gov.au/uses_economic/page_002.jsp



methodology: the boreal ecosystemwealth accounting system framework

~ p. 15 ~

3. 3.

The primary purpose of this study is to begin to identify, inventory, and measure the full economic value ofthe many ecological goods and services provided by Canada’s boreal region. As a result, we developed theBoreal Ecosystem Wealth Accounting System (BEWAS). Similar to conventional financial accounting systems,which include ledgers (accounts), a balance sheet (assets, liabilities, and owners equity), and an income statement,we propose the BEWAS as an ecosystem wealth accounting and measurement tool to assess the nature, state,and total socio-economic value of the boreal region’s natural capital assets and ecosystem services.

The BEWAS framework is designed to track natural resource stocks and flows (of both renewable and non-renewable natural resources), land, ecosystem services (i.e., the state or condition of ecosystem functions),and the total socio-economic value of these natural capital assets—both market and non-market values.Figure 2 shows the proposed BEWAS framework.

Gar

thLe

nz

3.1 The BEWAS Framework and Methodologies

Figure 2: Proposed Boreal Ecosystem Wealth Accounting System Framework

Boreal Ecosystems: Forests; Wetlands and Peatlands; Lakes,Rivers, and Riparian Zones; Undeveloped Lands

• Atmospheric stabilization• Climate stabilization• Disturbance avoidance• Water stabilization• Water supply• Erosion control and sediment retention• Soil formation• Nutrient cycling• Waste treatment• Pollination• Biological control• Habitat• Raw materials• Genetic resources• Recreation• Cultural use

Biological Resources

Forests Wetlands and peatlandsFish and wildlifeProtected spaces

Soil Resources Mineral and Subsoil Assets(oil and gas, coal)Water Resources Waste Production (emissions to air, land,and water)

Natural Capital Stocks and Flows Economic Values Economic ValuesEcosystem Functions

Natural Capital Accounts Land Accounts Ecosystem Service Accounts

Boreal Ecosystem Wealth Accounting System (BEWAS)



~ p. 16~

The BEWAS framework is consistent with both the UN system of Integrated Environmental and EconomicAccounting (SEEA) (see Table 2); the internationalguidelines for natural capital and environmentalaccounting; and Statistics Canada’s Canadian System ofEnvironmental and Resource Accounts (CSERA), whichtracks stocks, flows, and monetary values of Canada’snatural resource wealth.The UN SEEA is the currentinternational guide by which nations can begin toaccount for the sustainability of natural capital assets inthe context of economic well-being.The SEEA tackles

the overall goal of assessing the sustainability of theeconomy through different “categories,” or modules,of accounts that include: (1) physical and hybridaccounts of natural capital and ecosystem services,which aim to assess ecological sustainability and pro-vide links to the national monetary income accounts(from which GDP is derived); (2) environmentalexpenditure accounts, which account for defensiveexpenditures (e.g., environmental protection services,pollution remediation costs, and environmental reclamation expenses); (3) physical and monetary

Source: Peter Bartelmus. “Accounting for Sustainability: Greening the National Accounts,” in Our Fragile World, Forerunner to the Encyclopedia of LifeSupport Systems, vol. 2, ed. M. K.Tolba (Oxford: Eolss Publishers, 2001).

Table 2: UN System of Integrated Environmental and Economic Accounting:Flow and Stock Accounts with Environmental Assets

SUPPLY OFPRODUCTS

USE OF PRODUCTS

USE OF NATURALASSETS

DomesticProduction

thereof: for environmental

protection

Imports of products


protection

Economic cost(intermediate consumption,

consumption offixed capital)

Final consumption

OPENING STOCKS

Gross capitalformation,

consumption offixed capital

Exports of products


protection

Industries Households/Government

Rest of the World+

+

=

EconomicAssets

EnvironmentalAssets

OTHER CHANGES OF ASSETS

CLOSING STOCKS

Other changes ofeconomic assets

Other changes ofenvironmental

assets

EconomicAssets

EnvironmentalAssets

Assets

thereof: for environmental protection

Environmental costof industries

Environmental costof households

Natural capital consumption


~ p. 17 ~

asset accounts, which seek to assess the maintenance of natural capital (i.e., environmental sustainability of economic performance); and (4) environmentaladjustment accounts, which generate modified eco-nomic aggregates, such as a green GDP. According toPeter Bartelmus, “The SEEA reduces its scope and cov-erage to accounting for environmental sustainabilityonly—at the expense of the social dimension of sus-tainable development. Its ‘ecological approach’ thusfocuses on ecological sustainability, impaired by pres-sures on carrying capacities of natural systems; in con-trast, the ‘capital approach’ aims at capturing economicsustainability.The idea is to generate information forassessing both the physical and monetary sides of the sustainability coin.”32

Statistics Canada is an international leader in naturalcapital accounting. It developed CSERA,33 which isbased on the SEEA guidelines, to track the state ofCanada’s natural capital and environmental assets,including: (1) natural capital stocks (e.g., forests andsubsoil assets, such as minerals, oil and gas, and coal);(2) urban and rural use of land resources; (3) con-sumption of materials and energy (e.g., water andenergy use); (4) waste production (e.g., greenhousegas emissions); and (5) environment protectionexpenditures (e.g., pollution abatement and controlexpenditures by governments, industry, and house-holds).34 Some of these accounts for Canada’s naturalresource wealth show trends from 1961 to the present,and they are used to derive indicators of sustainability,e.g. estimates of energy asset reserve life (i.e., the yearsof reserves remaining at current production) ofCanada’s oil and gas resources.

CSERA represents a comprehensive framework for linking the economy and the environment throughphysical and monetary statistics. It comprises threeaccounts:

• Natural resource stock accounts, which measure quanti-ties of natural resource stocks and the annualchanges in these stocks due to natural and humanprocesses.These accounts, which are recordedusing both physical and monetary units, form thebasis of the estimates of Canada’s natural resourcewealth that are included in the Canadian NationalBalance Sheet Accounts.

• Material and energy flow accounts, which measure, inphysical terms only, the flows of materials andenergy—in the form of natural resources andwastes—between the economy and the environ-ment.These accounts are linked directly to theInput-Output Accounts.This linkage allows the calculation of important indicators of resource and waste intensity of economic activity.

• Environmental protection expenditure accounts, which iden-tify current and capital expenditures by business,government, and households for the purpose ofprotecting the environment.These accounts meas-ure both the financial burden associated with environmental protection, plus the contribution of environmental protection to economic activityfrom a demand-side perspective.

The environmental protection expenditure accounts inparticular are simply a decomposition of the existingcurrent and capital accounts for businesses, house-holds, and governments to explicitly show expendi-tures for environmental protection. Similarly, the natu-ral resource stock accounts, when measured in dollars,are an extension of the current Canadian NationalBalance Sheet Accounts and show the values of some of the natural resources provided by the environment.The remaining components of the CSERA fall outsidethe standard framework because they are not measuredin value terms and/or because they measure flows thattake place outside the boundary of marketplace activitythat defines the scope of the national accounts.

CSERA, consistent with the SEEA,35 divides natural capital into three main components:1. Natural resource stocks and flows (including renewable

and non-renewable resources)

2. Land and associated surface water

3. Environmental systems or ecosystems and ecological services

All three components are considered essential to thelong-term sustainability of the economy. Naturalresource stocks are the source of raw materials used in the production of manufactured goods (e.g., treesfrom forests or oil and gas from subsoil deposits).Land is essential for the provision of space in whicheconomic activity can take place (e.g., agricultural soil


32 P. Bartelmus. Green National Accounting: Measuring Sustainable Economic Growth (International Workshop on Green Accounting for China, Beijing, November 23-24, 2004).33 Retrieved September 2, 2005 from Statistics Canada website http://www4.statcan.ca/citygrp/london/venues/fontevraud_progress/canada.htm.The CSERA is

designed to fit within the framework of the Canadian System of National Accounts (CSNA).34 For a complete description of CSERA, see Statistics Canada, Econnections: Linking the Environment and the Economy (Ottawa, Statistics Canada, 2001).The report is available

through Statistics Canada at http://www.statcan.ca:8096/bsolc/english/bsolc?catno=16-200-X.35 For a detailed description of the international standards for natural capital and environmental accounting, see United Nations et al., Handbook of National Accounting:

Integrated Environmental and Economic Accounting.



~ p. 18~

for food production). Ecosystems are essential for theservices that they provide directly and indirectly to theeconomy, including cleansing of fouled air and water;provision of productive soil; provision of biodiversity;provision of a predictable and relatively stable climate;protection from incident solar radiation; and provisionof reliable flows of renewable natural resources.

In the BEWAS framework (see Figure 2), the naturalcapital accounts comprise natural capital stocks andflows and their economic values. Although ecosystemservices are part of natural capital, in this framework,they are reported separately as ecosystem serviceaccounts.This is because accounting for ecosystemservices involves primarily a qualitative assessment of the integrity or functionality of various ecosystemfunctions rather than a physical inventory of stocks

and flows as is the case for natural resources, such astimber. Natural capital is the sum total of renewableand non-renewable resources. Natural capital account-ing experts argue that in order for sustainability to beachieved, renewable natural capital stocks cannot beconsumed at rates which exceed the natural regenera-tion rate of these stocks. Moreover, if the natural func-tioning of the ecosystem is disrupted, degraded, ordestroyed by human activities to such a point that thequality of the services they provide declines, then thatlevel and type of economic production is no longersustainable.36

An example of an application of Statistics Canada’s nat-ural capital account for Alberta forests, developed bythe authors of this study, is shown in Table 3.The tim-ber natural capital account tracks changes (flows) inthe total stock of forest land, timber volumes, and theeconomic value of these forest capital assets over time.

3.1.1 BEWAS Natural Resource Accounts

36 Robert Smith, Claude Simard, and Andrew Sharpe, A Proposed Approach to Environment and Sustainable Development Indicators Based on Capital (Prepared for The NationalRound Table on the Environment and the Economy's Environment and Sustainable Development Indicators Initiative) (Ottawa: Statistics Canada, January 2001), p. 5.

Sources: Mark Anielski, Resource Accounting: Indicators of the Sustainability of Alberta’s Forest Resources (paper presented at the International Society ofEcological Economics meeting in Stockholm, Sweden, August 1992); Mark Anielski, Accounting for the Sustainability of Alberta’s Forests—The 1995Timber Resource Account (unpublished paper, 1996); and Mark Anielski and Sara Wilson. Alberta GPI Accounts: Forests (Ottawa: Pembina Institute forAppropriate Development, 2001).

* The economic value of timber capital is based on applying economic rent (economic rent = price less costs of production) estimates by the timber volume.

Table 3: Alberta Forest Resource Accounts Model

Forest Land Area Timber Volume Monetary Valuation*

[1] Opening stock

Additions:+ [2] Natural growth+ [3] Land-use additions

Reductions:- [4] Harvest- [5] Fire- [6] Insects and disease- [7] Mortality- [8] Loss due to roads,energy, and agricultural development

[1+2+3-4-5-6-7-8] = [9] Closing stock

(hectares) (cubic metres) ($)




Both additions (natural growth of trees and land-useadditions) and reductions (industrial development andnatural disturbances [e.g., fire] that affect forest landand timber volumes) are accounted for. A natural capitalaccount is similar to a bank account. The accountbegins with an annual opening balance of forest landand timber volume and is adjusted by annual additionsof timber capital volume (i.e., growth) and reductionsfrom the timber capital inventory.

The relationship between timber capital “interest”(growth) and “expenditures” (depletions or reduc-tions) defines the sustainability of timber capital; thatis, the extent to which we are living “off the interest”of forest capital or depleting our forest capital accountat unsustainable levels. Anielski and Wilson developed a Timber Sustainability Index (TSI)—the ratio betweentotal annual growth of the forest timber supply and theannual reductions from both natural and human dis-turbance—as an indicator of the overall sustainabilityof timber capital in Alberta.37

The boreal land accounts describe the physical area byland type and show how much of the land base is allo-cated to commercial or industrial development, howmuch is protected from development under protectivelegislation, and how much remains undesignated.Theboreal land included in these accounts are areas desig-nated for industrial land-use planning, areas underprotected designation for wilderness conservation,and areas currently occupied or used by the miningand petroleum sector.

Table 4 presents the various categories of land typesin the boreal region. Land, as a stock, is fixed interms of its total physical area. However, changes inthe way that land is used can occur (e.g., forest landcan be converted to agricultural land, and agriculturalland can be converted to urban land).

Evaluating land from the perspective of cover type(e.g., trees, crops, or buildings) can also serve as �a measur e of the use of land. In some cases, the sameparcel of land may have multiple uses (e.g., timberproduction, recreation, and wildlife habitat), but it will have only one cover type (e.g., mixed forest).In the BEWAS, the boreal land accounts track the totalarea of land by type of land use by ecosystem type.

Land accounts should also distinguish between intactversus developed ecosystems and by land designatedfor preservation (e.g., parks) or commercial/industrialuse (e.g., timber harvesting).This first BEWAS accountonly accounts for the area of boreal region land undervarious land-use classifications or designations such asforest and other wooded land, wetlands, peatlands,lakes, and reservoirs.

However, using Geographic Information Systems(GIS) analytic tools developed by Global Forest WatchCanada, estimates of the degree of fragmentation andlinear disturbance of the boreal region from industrial

~ p. 19 ~


3.1.2 Boreal Land Accounts

37 Mark Anielski and Sara Wilson, The Alberta GPI Accounts: Forests, Report #20 ( Drayton Valley, AB: Pembina Institute for Appropriate Development, September 2001).

Table 4: Boreal Lands Accounts Framework

Boreal Land Accounts (by area)

Forests

Wetlands and peatlands

Water bodies: rivers, streams, lakes

Other non-designated boreal land area

TOTAL boreal land area

Boreal land designated for land-use planning (current and future allocation to forestry)

Parks and natural areas under protected designation

Mineral lease land

Undesignated boreal land area (estimated)

Gar

thLe

nz



~ p. 20~

development were made in an attempt to assess the integrity (i.e., intact state) of the boreal forests. Some ofthese results are shown in Appendix II of this report. Considerably more work would be required to provide anaccurate account of the qualitative state of the boreal region’s ecosystems.

Ecosystem services are produced by interactions within the dynamic complex of plants, animals, microbes, andphysical environmental features that make up an ecosystem.These services are also referred to as the benefits

3.1.3 Boreal Ecosystem Service Accounts

Sources: Amanda Sauer. The Values of Conservation Easements (discussion paper, World Resources Institute, presented to West Hill Foundation forNature, December 1, 2002); Robert Costanza et al. The Value of the World’s Ecosystem Services and Natural Capital. Nature 387 (1997): pp. 253-260.

Table 5: Ecosystem Services and Their Functions

Ecosystem Service Ecosystem Function Examples of Services

Atmospheric stabilization Stabilization of atmospheric chemicals C02/02 balance; stratospheric ozone; S02levels

Climate stabilization Regulation of global temperature, Greenhouse gas production and absorption;precipitation, and other climate processes cloud formation

Disturbance avoidance Integrity of ecosystem responses Storm protection; flood control; droughtto environmental fluctuations recovery; vegetation structure that helps to

cope with environmental variability

Water stabilization Stabilization of hydrological flows Supply water for agriculture use (irrigation),industrial use, or transportation

Water supply Storage and retention of water Water storage by watersheds, reservoirs,and aquifers

Erosion control and sediment retention Retention of soil within an ecosystem Prevention of soil loss by wind and runoff;storage of silt in lakes, wetlands; drainage

Soil formation Soil formation process Weathering of rock; accumulation of organic material

Nutrient cycling Storage, internal cycling, processing and Nitrogen fixation; nitrogen/phosphorous,acquisition of nutrients etc.; nutrient cycles

Waste treatment Recovery of mobile nutrients and removal Waste treatment; pollution control;or breakdown of excess nutrients and detoxificationcompounds

Pollination Movement of floral pollinators Provision of pollinators for plants

Biological control Regulation of pest populations Predator control of prey species

Habitat Habitat for resident and transient Nurseries; habitat for migratory speciespopulations

Raw materials Natural resource primary production Lumber; fuels; fodder; crops; fisheries

Genetic resources Sources of unique biological materials Medicine; products for materials; science;and products genes for plant resistance and crop pests;

ornamental species

Recreation Opportunities for recreation Ecotourism; wildlife viewing; sport fishing;swimming; boating; etc.

Cultural Opportunities for non-commercial uses Aesthetic; artistic; education; spiritual;scientific; Aboriginal sites

38 United Nations, Millennium Ecosystem Assessment Synthesis Report (New York: United Nations, 2005).


~ p. 21 ~

that humans obtain from ecosystems. Services includeprovisioning, regulating, and cultural services thatdirectly affect people. They also include supportingservices, which are needed to maintain all otherecosystem services. Some are local services and othersare regional or global in nature.38

In the BEWAS framework, the ecosystem serviceaccounts comprise the ecosystem services provided by the boreal region based on ecosystem function.Accounting for ecosystem service values (physical,qualitative, or monetary values) represents the mostdaunting challenge for natural resource and environ-mental accounting.

Intuitively, we know that these complex ecosystemsare critical to human and ecological well-being, evenwithout attempting to measure their values. At best,we can identify some of the observed functions andservices of the boreal region, and use rough proxies or

indicators to assess the integrity of these functions(i.e., measure outcomes such as clean water). Indicatorspecies (e.g., a species of plant, fish, wildlife, or otherbiota) can serve as proxies of ecological integrity ineither terrestrial or aquatic ecosystems. However,scientific research into species-based indicators of ecological integrity, particularly in terrestrial ecosystems, is in its infancy.39

Table 5 provides a detailed list of ecosystem functionsand services that could be accounted for in an ecosys-tem accounting structure such as the BEWAS. It alsoprovides a useful framework for guiding further development of the BEWAS. Unfortunately, many ofthese ecosystem services are difficult to measure andplace a value on.

Table 6 provides a list of the ecosystem functions ofthe boreal region. We were able to provide either aphysical account or economic value estimate for those


39 See Appendix I for a discussion on the state of measuring ecological integrity.

Table 6: Boreal Ecosystem Service Accounts Structure and Data

Ecosystem Ecosystem Service Ecosystem Service Value AssessedForests * Atmospheric and climate stabilization Carbon storage and annual carbon sequestration by forests

Disturbance avoidance a

* Water stabilization and water supply Watershed service: municipal water use-cubic metres/year (database incomplete)

Erosion control and sediment retention a

Soil formation a

Nutrient cycling a

Waste treatment a

Pollination a

Biological control a

Habitat a

* Raw materials • Subsistence values for Aboriginal communities and households• Non-timber forest products (mushrooms, berries, and wild rice)

* Genetic resources • Biodiversity: value of birds for pest control• Biodiversity: passive value—willingness to pay (WTP) for

conservation

Air quality a

* Recreation Economic value to Canadians from recreation-related activities in the boreal region

* Cultural Subsistence values for Aboriginal communities and households



~ p. 22~

Table 6: Boreal Ecosystem Service Accounts Structure and Data

Ecosystem Ecosystem Service Ecosystem Service Value AssessedWetlands and peatlands * Atmospheric and climate stabilization Carbon storage and annual carbon sequestration by wetlands

and peatlands

* Disturbance avoidance Flood control, water filtering, and biodiversity value

* Water stabilization and water supply Included in flood control, water filtering, and biodiversity value

* Erosion control and sediment retention Included in flood control, water filtering, and biodiversity value

Soil formation a

Nutrient cycling a

Waste treatment a

Pollination a


Habitat a

* Raw materials Part of subsistence values for Aboriginal communities and households

* Genetic resources Included in flood control, water filtering, and biodiversity value

* Recreation Included in the economic value to Canadians from recreation-related activities in the boreal region

* Cultural Part of subsistence values for Aboriginal communities and households

Lakes, rivers, * Atmospheric and climate stabilization a

riparian zones

Disturbance avoidance a

Water stabilization and water supply a

Erosion control and sediment retention a

Soil formation a

Nutrient cycling a

Waste treatment a

Pollination a


Habitat a

* Raw materials Included in subsistence values for Aboriginal communities and households

Genetic resources a

Air quality a

* Recreation Included in the economic value to Canadians from recreation-related activities in the boreal region

* Cultural Included in subsistence values for Aboriginal communities and households

Undeveloped lands * Cultural Included in the economic value to Canadians from recreation-related activities in the boreal region

a Data not available to assess ecosystem service value.

Source: Boreal Ecosystem Service Accounts based on Nancy Olewiler. The Value of Natural Capital in Settled Areas of Canada (Stonewall, MB, and Toronto:Ducks Unlimited Canada and the Nature Conservancy of Canada, 2004).


~ p. 23 ~

marked with an asterisk. For example, it was possibleto account for the amount of carbon stored and annuallysequestered by forests and peatlands in the borealregion and estimate a range of economic values forthese ecological goods and services. For some ecologi-cal functions, such as pollination and soil formation,data were not available.

Our proposed BEWAS represents an idealized environ-mental accounting framework. Ideally, all ecosystemfunctions should be accounted for by measuring theirphysical and qualitative conditions and their economicvalue. However, as with natural capital inventories,there is a general lack of information about the state of boreal ecosystem functions.Therefore, it is currentlynot possible to account for the integrity of borealecosystems in accordance with the diversity of theirecological functions.

While the availability of physical or quantitative data wasa serious constraint to the construction of a set of borealecosystem accounts, we were fortunate to have access toa wealth of spatial, geo-coded information from varioussources including satellite imagery (see section 3.2 DataLimitations).We were also able to estimate the economicvalues of some ecosystem functions, goods, and servicesdrawing from a large and growing body of environmen-tal and ecological economics literature.

To account for the effects of human and natural distur-bance on the conditions, state, or integrity of ecosystemfunctions, as well as their economic value, a Pressure-State-Response (PSR) model40 may provide a usefulframework (see Table 7). Using this framework, it is possible to account for the various kinds of human andindustrial pressures on ecosystems, as well as changes inthe economic values under various ecological conditions.These pressures include industrial development,community development, and other human pressures


40 The PSR model has been used by many Organisation for Economic Co-operation and Development (OECD) countries, the World Bank, and other nations for environmentalreporting.The PSR is a convenient representation of the linkages among the pressures exerted on the land by human activities (pressures), the change in quality of the resource(state), and the response to these changes as society attempts to release the pressure or to rehabilitate land that has been degraded (response).The interchanges among thesehuman pressures and natural resource states form a continuous feedback mechanism that can be monitored and used for assessment of land quality. See OECD. OECD Core Set ofIndicators for Environmental Performance Reviews.A Synthesis Report by the Group on the State of the Environment (Paris, France: OECD, 1993), p. 35 andhttp://www.fao.org/docrep/W4745E/w4745e08.htm.

* Conservation utility is used by the Coast Information Team in their report An Ecosystem Spatial Analysis for Haida Gwaii, Central Coast, and North Coast BC April2004.The term refers to a broad measure of the irreplaceability of ecosystems in terms of their function, where irreplaceability is defined intwo ways: (a) the likelihood that a particular area is needed to achieve an explicit conservation goal; or (b) the extent to which the options forachieving an explicit conservation goal are narrowed if an area is not conserved. For purposes of accounting for the condition or state or pro-ductivity of an ecosystem, the concept and measure of conservation utility (ranging from high, medium, and low utility) may be useful withinthe BEWAS framework.

Table 7: Ecosystem Service Accounting Structures Model

Ecosystem Pressure Condition Economic Values(State)

Intact Modified Developed Value Value under Value underassuming current modified currentall intact ecosystem developed

conditions from ecosystemindustrialization conditions from

industrialization

Forests


Aquatic (lakes, rivers,streams,riparian zones)

Other undeveloped land or ecosystems

(human and

natural disturbance)

(high, medium,or low

conservation utility*)

($)



~ p. 24~

on natural systems.They also include natural disturbancepressures (e.g., fire) that affect the state or condition orintegrity of an ecosystem. It should be noted that naturaldisturbance is part of an ecosystem’s state of being andcan be seen as one of nature’s services. For example,wildfires can have a catastrophic impact on a forestecosystem, yet they are critical to the renewal of anecosystem and a necessary disturbance for the regenera-tion of some boreal species; so a natural disturbance maynot necessarily be a negative occurrence/pressure.

To assess the pressures on ecosystem functions, spatialanalysis using geo-coded data and GIS was useful forestimating some natural capital stocks and flows (e.g.,estimates of timber harvesting in the absence of anational boreal harvest inventory), and ecosystempressures (e.g., estimates of the industrial footprint and ecosystem fragmentation).

While incomplete, such analysis could be developedwith more sophisticated satellite imagery and spatialanalysis and eventually serve as an early warningsystem that a potential ecological tipping point (i.e.,a sudden bifurcation or sudden ecosystem functionalcollapse) may be on the horizon due to increasingindustrial development pressures.

Such analysis, used in the context of the precautionaryprinciple,41 could be useful for decision makers whoare concerned about avoiding the potential irreversibleloss or degradation of ecosystems and their functions.

It is clear that significant challenges remain with respectto measuring both the qualitative state and value ofecosystems in terms of their ecosystem services. Indeed,applying economic value estimates to the total area ofexisting ecosystems such as forests and wetlands effec-tively assumes that each respective ecosystem serviceaccounted for is functioning at its optimum level.Thiswould tend to overstate ecosystem service values.

On the same hand, the losses of ecosystem service values due to ecosystem degradation are not beingaccounted for in the absence of a qualitative assessmentof ecosystem integrity.We know from spatial analysis offorest fragmentation due to industrial development, forexample, that large and growing sections of the southernboundary of the boreal region are in less than an opti-mum ecological state of health and functionality. A betterestimate of the current value would be measured interms of the regrettable loss or costs to human and eco-logical well-being associated with human and industrial

41 The precautionary principle, a phrase first used in English circa 1988, is the ethical theory that if the consequences of an action, especially concerning the use of tech-nology, are unknown but are judged by some scientists to have a high risk of being negative from an ethical point of view, then it is better not to carry out theaction rather than risk the uncertain, but possibly very negative, consequences. See http://en.wikipedia.org/wiki/Precautionary_principle.

Nor

ther

nIm

ages

Way

neSa

wch

uck


~ p. 25 ~

development. However, we feel that theecosystem values presented in this studyare conservative because we have notaccounted for the full list of ecosystemfunctions.

We estimated approximate values forecosystem services where possiblebased on the best and most currenteconomic valuation methods.The val-ues have been applied to the respectivearea of each ecosystem or its approxi-mate component (e.g., the estimatedclimate regulation benefits, in terms of carbon sequestration, are based onthe economic value per tonne of carbon stored by the total forested landin the boreal region).The valuationmethodology and sources used to cal-culate the value of ecosystem functionsare outlined in section 4.2.3 The EconomicValues of Boreal Ecosystem Services. In general,we took the following steps to deter-mine the most appropriate ecosystemservice values for the boreal region:

1. We conducted a literature review to find the best available informa-tion on the extent of each borealecosystem and its attributes.

2. We conducted a literature review to identify ecosystem valuationstudies undertaken within theboreal region.

3. If ecosystem valuation studieswithin the boreal region were notavailable, we conducted a literaturereview and contacted experts toassess the most appropriate currentstudies and, therefore, values avail-able for benefits transfer to theboreal region.

4. We used the following criteria indeciding on an ecosystem service

value for benefits transfer:

a. Where a value from a study onthe boreal region was available,we adopted it (e.g., replace-ment cost of carbon throughafforestation; biodiversityconservation).

b. Where a direct use value couldbe assessed, we adopted it(e.g., municipal water use).

c. Where a market proxy valueexisted, we adopted it (e.g.,recreation values).

d. Where a large range of valueswas presented in the literature,we adopted results from ameta-analysis (e.g., wetlandvalues).

In attempting to construct a preliminaryBEWAS, we conducted an exhaustivesearch of numerous government andother datasets on natural capital relatedto the boreal region that could be usedto “populate” our BEWAS frameworkwith real current and historical data.

It became evident that there is inade-quate boreal-specific baseline informa-tion on the current state and rate ofchange of the boreal region’s resources,which is critical for monitoring theconditions and overall sustainability ofthe boreal region. For example, data oncurrent stock and changes in the borealnatural capital assets such as forestinventory, minerals, petroleumresources, water resources, fish andwildlife, and arable agricultural land are not currently available.42


Towards a NaturalCapital Balance Sheet

Nat

asha

Moi

ne

3.2 Data Limitations

42 Credible boreal research requires detailed, up-to-date, boreal-specific data. Unfortunately, the current state of CanFIlacks satisfactory boreal-specific baseline information on the nature and rate of change to the boreal region'sresources. Our requests for boreal-specific inventory were ultimately frustrated as we waited months for basic rawdata that would give us a single dataset for the area and volume of standing timber in the boreal region.The researchprocess was also hampered by the reality that each province, which maintains control of provincial forest inventories,must approve the release and use of data on a publicly owned natural capital asset. This experience was both frustrat-ing and disappointing given the importance of such knowledge for the effective stewardship and sustainability ofboreal ecosystems. Other challenges also persist, including irregular provincial inventories (i.e., province inventoriesvary because of different methods and years of inventory). Even when we eventually did receive the CanFI boreal-onlyinventory, several problems were identified with the dataset. Ultimately we chose to use basic boreal ecozone forestland area data available on the CanFI website.

The natural capital assets found in the boreal region are vast andplay a major role in global cycles(e.g., hydrological flows, carbonsequestration) that support life on Earth.

Canada continues with industrialdevelopment in the boreal regionwithout tracking or monitoring theconsequences of development forits natural capital. This is akin to amajor corporation like Coca Cola orNoranda charting a business coursewithout a complete inventory andbalance sheet of its key assets.

Prudence would argue that a fullassessment of natural capital assetsand the values of ecosystem servicesshould take place prior to furtherdevelopment of the region.



~ p. 26~

Moreover, flow data such as the volume and rate oftimber harvesting, the impacts on forests of otherland-use development (e.g., oil and gas development),and the impact of forest fires on boreal forests arenot available. Our attempts to develop a boreal carbonaccount (the amount of carbon stored and sequesteredannually) based on Canada’s National Forest Inventory(CanFI) were hampered by a lack of sufficient progresson, and utility of, Canada’s emerging carbon budgetingmodel. Most importantly, there is simply no informationor measures of the integrity of boreal ecosystems,and thus no capacity for assessing the condition ofecosystem services. In the absence of hard, quantitativeinventory data, we faced a daunting challenge inconstructing a meaningful set of economic value estimates for the boreal region’s natural capital andecosystem services.

The natural capital assets found in the boreal regionare vast and play a major role in global cycles (e.g.,hydrological flows, carbon sequestration).Thus, it ishard to fathom that Canada has such limited informa-tion on the overall condition of the boreal region.

Despite this information deficit, Canada continues withindustrial development in the boreal region withouttracking or monitoring the consequences.This is akinto a major corporation like Coca Cola or Norandacharting a business course without a complete inven-tory and balance sheet of its key assets. Despite signifi-cant data limitations, we were able to populate parts ofthe BEWAS with both estimates of the stocks and flowsof some key natural capital accounts (proxies for actualinventories) by extracting spatial, geo-coded data onthe boreal region. Using these datasets, we were ableto estimate economic monetary values for both marketand non-market natural capital extraction andecosystem services.

In the absence of concrete quantitative data for theboreal region, land-use decision-making anddevelopment in the region will continue to be poorlyinformed. Prudence would argue that a full assessmentof natural capital assets and the values of ecosystemservices should take place prior to further developmentof the region.

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results and summary: economic values of canada’s boreal natural capital and ecosystem services

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4.

This section summarizes the study’s findings on the physical conditions of the boreal region’s natural capitalassets and ecosystem services. Each account in the Boreal Ecosystem Wealth Accounting System (BEWAS) is

further detailed in this section of the study, which describes the findings and provides a brief summary of datasources and accounting methodologies.

Table 8 presents the area of boreal land accounts categorized by land-use category and land base by designationor allocation (under land-use planning or currently in use by industry).The table shows that the most signifi-cant land account is forests (forest and wooded land), which cover 328,634,000 hectares, or 56.3 percent oftotal boreal land area. Peatlands are next in size, and cover 83,200,000 hectares, or 14.2 percent of total borealland area. Lakes cover 59,227,000 hectares, or 10.1 percent of total boreal land area.43 The balance of the borealland account includes 2,836,800 hectares of wetlands (0.5 percent of total boreal land area) and other undesig-nated, or unidentified, boreal land that makes up the final 106,078,200 hectares (or 13.8 percent of total borealland area).44 In addition, there are areas of water bodies: rivers, lakes, and reservoirs, and wildlife habitat.

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4.1 Boreal Land Accounts

43 Figures for forest land only, wooded land area, and the total boreal region area are from the most current CanFI. Estimates of wetlands, peatlands, lakes, and reservoirs are esti-mated by Global Forest Watch Canada; these estimates were not available from CanFI.

44 Since we are using two different data sources, CanFI and Global Forest Watch Canada, we cannot assure that all figures are accurate or additive, though we have reconciled allfigures to the total boreal region area estimate of 584,079,000 hectares reported by the CanFI database.

Sources: Canadian Forest Service, Canadian National Forestry Inventory (available at http://nfi.cfs.nrcan.gc.ca/canfi/data/classification-large_e.html), and Global Forest Watch Canada.

Table 8: Boreal Land Accounts

Boreal Land Accounts Detailed Land Accounts Area (ha)Land Category

Forests * Forest land only 241,985,000* Wooded land only 86,649,000* Total forests 328,634,000

Wetlands and peatlands * Wetlands 2,836,800* Peatlands 83,200,000

Water bodies: rivers, * Lakes 59,227,000streams, lakes * Reservoirs 4,103,000Other non-designated boreal land area 106,078,200

TOTAL boreal land area 584,079,000Area of Boreal Under Allocation or Designation

Boreal land designated for land-use planning 169,382,000(current and future allocation to forestry)

Parks and natural areas under protected designation 53,971,000Mineral lease land (* Industrial footprint area of mining 46,225,000facilities, well sites, pipelines, and other industrial use

Undesignated boreal land area (estimated) 314,470,000



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Table 10 provides an overall summary of the results of the BEWAS, showing stock, flow, and monetary economic value estimates for 2002.45 For the most part, the reporting period is only a single point in time depending on the year of the data that was available (either a standard benchmark year like 2002or the next best data year).46

Monetary economic value estimates used a single year estimate of the current market or non-marketvalue. In the case of market values, GDP estimates for forestry and mining/petroleum industry activitieswere estimated for the boreal region for 2002.

Source: Canadian Forest Service, available athttp://nfi.cfs.nrcan.gc.ca/canfi/data/ecozones-small_e.html.

4.2 Boreal Natural Capital and Ecosystem Service Accounts

45 The year 2002 was chosen as the benchmark year since much of the data we were able to gather came from this reference year. In some cases, where noted, data were olderand in others more current; however, for purposes of a standard accounting period we chose 2002. All economic value estimates are shown in 2002 dollars; some older valueestimates were converted to 2002 dollar estimates using Canada's GDP chained implicit price index.

46 In the case of market values for forestry, mining, and oil and gas activities, GDP figures were available for 2003 and 2004; however, as noted for reasons of comparability withother value estimates, we chose 2002 as the benchmark year for relative comparison of both market and non-market values.

Table 9: Boreal Land Account by ecozone

Boreal Region Ecozones Area (hectares)

Taiga Plains 63,722,000

Taiga Shield 135,431,000

Boreal Shield 199,642,000

Boreal Plains 74,412,000

Taiga Cordillera 26,366,000

Boreal Cordillera 47,772,000

Hudson Plains 36,734,000

TOTAL 584,079,000

Source: Canadian Forest Service, retrieved September 2 at the CFSwebsite http://nfi.cfs.nrcan.gc.ca/canfi/data/ecozones-small_e.html.

Table 9 shows the distribution of land within the borealregion by ecozone.

Table 10: Boreal Ecosystem Wealth Natural Capital Accounts, 2002

Boreal Ecosystem Stock and Flow Data Monetary Economic Values and Wealth Natural Regrettable Costs (2002$)a

Capital Accounts

Forests Stocks:* 14.7 billion cubic metres in the volume of stand-

ing timber in the boreal ecozones, all age-classes* 242 million hectares in total forest land area in

the boreal ecozones (or 41.4% of total boreal landarea)

Flows:* 95.2 million cubic metres is the annual timber

harvested from the boreal forest in 2002 (est.)* 2.46 million hectares is the average annual area

of boreal forest burned from 1980 to 1997* 236.2 million cubic metres of timber burned per

annum due to forest fires from 1980 to 1997 * 92.9 million hectares of boreal forest land has

been fragmented due to linear disturbance fromindustrial development and industrial footprint(roads, seismic lines, pipelines, well sites, etc.)

Other indicators:* 169.4 million hectares of boreal forest (or 29.0%

of total boreal land base) designated under land-use planning for current or future forestry devel-opment

* 0.65% is the ratio of timber harvested in 2002 tothe total timber volume

* 19.6% of the boreal forest land area has beenfragmented due to linear disturbance from indus-trial development

Market values:* $14.9 billion in estimated market value of

forestry-related GDP in the boreal region (est.2002)

* $61.41/hectare, forestry-GDP per hectare of totalarea of forest land area in the boreal region (est. 2002)

Costs:* $150 million in estimated cost of carbon emis-

sions from forest industry activity in the borealregion (deduction against forestry-related GDP)


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Ecosystem services:* 47.5 billion tonnes of carbon storage* 103.6 million tonnes of annual carbon

sequestration by forest biomass and soil* 368 million cubic metres of water per year;

watershed service: municipal water use (cubicmetres/year [database incomplete])

* Subsistence value for Aboriginal communitiesand households (51,166 households in borealregion)

* Non-timber forest products (60% of commercialvalue for mushrooms, berries, and wild rice)

* Biodiversity: $21.48 per hectare for value of pestcontrol by birds

* Biodiversity: passive value—willingness to pay(WTP) for conservation: $16.81/household for 50% of boreal households

* 6.1 million Canadians participated in nature-related activities (all ecosystems)



Capital Accounts

Forests (cont’d)


Fish and wildlife

Stocks:* 2.8 million hectares of wetlands in the boreal

region (or 0.5% of total boreal land area)* 83.2 million hectares of peatlands in the boreal

region (or 14.2% of total boreal land area)* 19.5 billion tonnes of carbon stored in peatlands

(only)

Flows:* 21.4 million tonnes of carbon sequestered

annually by boreal peatlands (2002 est.)

Ecosystem services:* 19.5 billion tonnes of carbon storage in peatlands* 21.4 million tonnes of annual carbon sequestra-

tion by peatlands* Flood control* Water filtering * Biodiversity values

Stocks (boreal endangered species):* 23,819 hectares of habitat for whooping cranes,

and 5.5% of this area impacted by habitatfragmentation from industrial development

* 514,078 hectares of habitat for woodland caribou(southern mountains), and 57.7% of this areaimpacted by habitat fragmentation from industrial development

* 22,614,635 hectares of habitat for woodland caribou (boreal), and 12.7% of this area impactedby habitat fragmentation from industrial devel-opment

* 9,644,986 hectares of habitat for woodland bison(boreal), and 39.6% of this area impacted by habi-tat fragmentation from industrial development

* 20,132,602 hectares of habitat for wolverine (west-ern region), and 7.7% of this area impacted by habi-tat fragmentation from industrial development

* 5,600,927 hectares of habitat for wolverine (eastern region), and 5.2% of this area impactedby habitat fragmentation from industrial development

Non-market values:* $849.2 billion for value (replacement cost:

afforestation) of the total carbon stored in forests* $1.9 billion for annual net carbon sequestration

(excludes peatlands)* $18 million for watershed service (i.e., municipal

water use)* $575 million in subsistence value for Aboriginal

peoples* $79 million in non-timber forest products* $5.4 billion in value for pest control services

by birds* $12 million for passive conservation value* $4.5 billion for nature-related activities

Non-market values:* $341.6 billion in estimated replacement

cost value of carbon stored in peatlands * $383 million in estimated annual replacement

cost value of peatlands sequestering carbon* $3.4 billion for flood control, water filtering, and

biodiversity value by non-peatland wetlands* $77.0 billion for flood control and water

filtering by peatlands only

Note: The market value of wildlife related to com-mercial trapping or fishing industries was not esti-mated due to the lack of statistics or analysis specif-ic to the boreal region.



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Capital AccountsProtected spaces

Soil resources (agricultural soil by capability)

Minerals and subsoil assets

Water resources

Waste production (emissions to air, land,and water)

Stocks:* 53.75 million hectares of boreal region (or 9.2%

of total boreal land area) is under protected designation

not analyzed

Stocks:* 46.25 million hectares is the estimated area of

mining, and oil and gas industrial footprint (or7.9% of total boreal land area)

Stocks:* 59.2 million hectares of lakes and 4.1 million

hectares of reservoirs covering the total borealland aread

Flows:* 368 million cubic metres of water used by

municipalities in the boreal region from forestwatersheds (2002 est.)

Flows:* 4,911 tonnes of total carcinogens and toxic

substances by industry* 1,411,086 tonnes of total emissions to air of SO2,

NO2, PM2.5, and VOC (tonnes) in 2002• 180,824 tonnes of NO2• 1,129,108 tonnes of SO2• 22,406 tonnes of PM2.5• 78, 668 tonnes of VOCe

* 14 million tonnes of carbon emissions due to fossil fuel use by forest products sector

not analyzedb

not analyzedc

Market values:* $14.5 billion in GDP from mining, and oil and gas

industrial activities in the boreal region (est. 2002)

* $24.87/hectare, GDP value for mining, and oil andgas industrial activities per hectare (based ontotal boreal land area; est. 2002)

Costs:* $541 million in federal government expenditures

as estimated subsidies to oil and gas sector in theboreal region

* $474 million in government expenditures as esti-mated subsidies to mining sector in the borealregion

Market values:* $19.5 billion in GDP for hydroelectric generationfrom dams and reservoirs in the Boreal Shield eco-zone (est. 2002)

Costs:* $9.9 billion in estimated air pollution costs to

human healthf

Note: Figures are shown in millions in this table while summary Table 1 shows figures in both billions and millions. Market values are shownin blue; non-market values are shown in green; and environmental/societal costs are shown in red.

Data Sources: Please refer to the various valuation sections in the report for full source references.

a A GDP chained, implicit price index was used throughout report to standardize to 2002 dollars.

b The value of protected spaces (e.g. parks and designated wilderness) were not calculated for this study, however, some of these values may be included in the value of nature to Canadians estimates.


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c The state and economic value of the boreal region's soil resources were not analyzed in the absence of data on soil assets.

d Spatial area estimates of rivers and streams are not available, nor are groundwater inventory (stock) and flow data.Total water volume estimatesare not available.

e From the National Pollution Release Inventory (emissions to air, only).

f Based on European Union air pollution cost estimates for SO2, NOx, PM2.5, and VOC for 2002.



Capital AccountsTOTAL market values (forestry, mining, oil and gas activities,and hydroelectric generation)

Less cost of pollution and subsidies:* Air pollution costs * Government subsidies

to mining sector* Federal government

subsidies to oil and gas sector

* Forest sector carbon emission costs

NET market value of boreal natural capital extraction

TOTAL non-market value of boreal ecosystem services

RATIO of non-market to market values

$48.8 billion

- $9.9 billion- $474.2 million

- $540.8 million

- $150.2 million

$37.8 billion

$93.2 billion

2.5

Non-market values were estimated for some borealecosystem services using various approaches. As aresult, market and non-market values for the borealregion can be compared.

In conjunction with the market value estimates forforestry and mining/petroleum industry operations,the environmental costs of air pollution from industryoperating in the boreal region, the costs of carbonemissions due to fossil fuel use by the forest productssector, and the costs of government expenditures(measured as government “subsidies”) that supportmining, and oil and gas activities operating in theboreal region were estimated and deducted.

The combined GDP market value of the forestry, min-ing, oil and gas, and hydroelectric generation sectors inthe boreal region totalled an estimated $48.9 billion for2002 (before environmental depreciation costs and gov-ernment subsidies), or roughly 4.2 percent of Canada’sGDP in 2002 ($1,158 billion).47 Since we lack detailedinformation regarding current boreal-related GDP fig-ures that could confirm the total percentage of GDPfrom Canada’s boreal region, we derived a GDP valuebased on estimates for the forestry, mining, oil and gas,and hydroelectric generation sectors. It is certain thatour GDP estimate understates the full GDP value of allindustrial activity in the boreal region.

47 Our GDP estimate differs from an earlier 1991 estimate of $64 billion in GDP from market-based industrial activity in the boreal region or 10 percent of Canada'stotal GDP.The $64 billion estimate in GDP from the boreal region comes originally from N. Urquizo et al. Ecological Assessment. If the 1991 GDP estimate wereindexed or inflated to 2002 dollars (assuming the same relative size of GDP from hydroelectricity), then this would equate to a GDP of $75.5 billion in 2002,$10.3 billion higher than our estimate. Moreover, if we apply the 1991 estimate that 10 percent of Canada's GDP comes from the boreal region to Canada's 2002GDP, then this would equate to a boreal-related GDP estimate of $115.8 billion.



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Using available data, we deducted some of the govern-ment expenditures to the mining, and oil and gas sector,as well as estimates of the cost of fossil fuel use by theforest products sector and the health costs associatedwith air pollutants released by industry in the borealregion. It is certain that we have not accounted for thefull costs of regrettable environmental depreciation fromindustrial activity and the full costs of total governmentsubsidies or direct expenditures that benefit industry inforestry, oil and gas, and other sectors. However, thisstudy does offer a preliminary full cost account of thenet economic value of market-based natural capital use,where regrettable environmental or ecological deprecia-tion costs are deducted from the gross value of industrialdevelopment (as measured by GDP).

The net market value of boreal natural capital extrac-tion is estimated at $37.8 billion on an annualizedbasis for 2002; air pollution costs from industrial

emissions, government subsidies to the mining, andoil and gas sectors, and the estimated costs of carbonemissions due to fossil fuel use by the forest productssector are included as deductions in this figure.Meanwhile, the total non-market value of borealecosystem services is estimated at $93.2 billion for2002. Our analysis reveals that when we compare themarket and non-market values for 2002, the totalnon-market value of boreal ecosystem services is2.5 times greater than the net market value of bore-al natural capital extraction.

The following sections of this study provide a moredetailed description of each of the BEWAS naturalcapital and ecosystem service function accounts weexamined, including a brief description of themethods we used to estimate stocks, flows,indicators, and economic values.

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Table 11 summarizes the estimates of the total market values associated with the extraction and development of theboreal region’s natural capital. Forestry, mining, oil and gas, and hydroelectric generation are the largest industriesoperating in the boreal region and have a combined economic value (based on GDP estimates) of $48.9 billionbased in 2002.48 When the cost of government support expenditures for the mining, and oil and gas sectors, thecost to human health of industrial air pollution, and the cost of fossil fuel use by the forest products sector aretaken into account, the net market value of the development of the boreal region’s natural capital is estimated at$37.8 billion.

Details of each of the market-value estimates and the estimated environmental and societal costs associated withindustrial development are provided in the following sections.


48 While GDP figures for 2003 and 2004 were available for some of the sectors, we chose 2002 as our benchmark or standardized year of account to facilitate com-parison of other market and non-market values.

4.2.1 Market Values of Boreal Natural Capital

Source: Boreal Ecosystem Wealth Accounts; see various section of report for details.

a The estimated market values per hectare for forestry and mining are not additive since they reflect a different land base of operations.

Table 11: Market Values of Boreal Natural Capital and Associated Environmental and Societal Costs

Natural Capital Resource Stock Flow Market Value Market Value(total) (annual extraction) GDP per Hectare

(2002$ billions) (2002$/hectare)

Market Values

Forestry 14.7 billion 95.2 million cubic $14.9 billion $61.41cubic metres metres harvested(volume)242 million 593,811 hectareshectares (area) harvested

Mining, oil and gas 46.3 million $14.5 billion $24.87hectares (industrialfootprint)

Hydroelectric generation $19.5 billion

Subtotal Market Values $48.9 billion $83.63a

Costs

Air pollution health costs 180,824 tonnes - $9.9 billion(industrial emissions) NO2; 1,129,108

tonnes SO2;22,406 tonnesPM2.5;78,668 tonnesVOCs

Government support - $474 millionexpenditures (mining)

Federal government support - $541 millionexpenditures (oil and gas)

Forest sector carbon 14 million tonnes - $150 millionemissions costs released due to

fossil fuel use

Subtotal Costs - $11.1 billion

NET MARKET VALUES $37.8 billion



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4.2.1.1 Boreal Forest Timber Volume and Market Value

The total stock of forest land in the boreal region is 241,985,000 hectares according to Canada’s National ForestInventory (CanFI) for 2001.49 The stock of standing timber volume across the boreal region is an estimated14.7 billion cubic metres.50 In the absence of accurate timber harvest figures for the boreal region, it was estimatedthat the annual timber harvest in 2002 was roughly 95.2 million cubic metres (0.65 percent of total timbervolume), or an estimated 593,811 hectares of forest land area harvested (0.25 percent of total boreal forestarea). This estimate was derived from spatial analysis conducted by Global Forest Watch Canada by taking thespatial estimates of the area of forest harvested in the boreal ecozones times the reported timber volumeharvested by province (see Table 12).

49 Canada's National Forest Inventory. CanFI Data Summaries:Area Classification by Terrestrial Ecozone and Province/Territory, 2001, retrieved September 2, 2005 from the CFS websitehttp://nfi.cfs.nrcan.gc.ca/canfi/data/classification-large_e.html.

50 In the absence of available national forestry inventory data on timber harvest from the boreal region, Global Forest Watch Canada roughly estimated the percentageof Canada's Boreal/Taiga ecozones that are harvested by volume and by area.The harvest estimates are based on the following: British Columbia—2% of the vol-ume and 5% of the area are harvested in the Boreal/Taiga ecozones.The assumptions are: (a) The vast majority of the harvest is from the Montane Cordillera andPacific Maritime Ecozones; (b) the more northerly Boreal Cordillera, Boreal Plains, and Taiga Plains ecozones show minor harvest areas, based on viewing satelliteimages; (c) the Boreal/Taiga ecozones are furthest from market and production facilities and therefore have received minor harvesting in comparison to the otherecozones; (d) areas of Boreal/Taiga ecozones that are harvested produce less wood per equivalent area than other ecozones in BC. Alberta—100% of the volumeand 100% of the area are harvested in the Boreal/Taiga ecozones.The assumption is that very minor amounts of harvested wood come from the more southerlyMontane Cordillera and Prairies ecozones. Saskatchewan—100% of the volume and 100% of the area are harvested in the Boreal/Taiga ecozones.The assumption isthat no harvested wood comes form the more northerly Taiga Shield ecozone and a negligible amount comes from the Prairies ecozone. Manitoba—100% of thevolume and 100% of the area are harvested in the Boreal/Taiga ecozones.The vast majority of the logging occurs in the Boreal Shield and Boreal Plains ecozones(and none from the other Boreal/Taiga ecozones, namely,Taiga Shield and Hudson Plains) and a negligible amount comes from the Prairies ecozone. Ontario—95% of the volume and 95% of the area are harvested in the Boreal/Taiga ecozones. Quebec—90% of the volume and 90% of the area are harvested in theBoreal/Taiga ecozones. New Brunswick—0% of the volume and 0% of the area are harvested in the Boreal/Taiga ecozones.There are no Boreal/Taiga ecozones inthis jurisdiction. Nova Scotia—0% of the volume and 0% of the area are harvested in the Boreal/Taiga ecozones.There are no Boreal/Taiga ecozones in this juris-diction. PEI—0% of the volume and 0% of the area are harvested in the Boreal/Taiga ecozones.There are no Boreal/Taiga ecozones in this jurisdiction.Yukon—100% of the volume and 100% of the area is harvested in the Boreal/Taiga ecozones.The assumption is that the only productive forest is within the Boreal/Taigaecozone, as opposed to the more northerly Southern Arctic and more southerly Pacific Maritime ecozones.

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The estimated market value of timber harvesting activities in the boreal region can be measured in terms ofshare of Canada’s forestry GDP, value of shipments, and other market values that come from the boreal region.The total GDP market value for the forestry sector in Canada in 2002 was $29.5 billion, based on StatisticsCanada data.51 We estimate that the boreal region’s contribution to Canada’s forestry GDP figures is 50.3 percent,based on the percent of timber volume harvest from the boreal region (as a percent of total Canadian harvestvolumes). On this basis, we estimate that the boreal region’s contribution to Canada’s forestry GDP in 2002 was$14.9 billion.The value per hectare of total boreal forest land area is estimated at $61.41 per hectare (based onthe ratio of forestry GDP per total boreal forest land area: 241,985,000 hectares).


a Also see National Forest Database Program, retrieved September 2, 2005 from the CCFM website http://www.nfdp.ccfm.org/compendium/highlights_e.php and http://www.nfdp.ccfm.org/compendium/harvest/summary_e.php.

b National Forestry Database Program, retrieved September 2, 2005 from the CCFM website http://www.nfdp.ccfm.org/compendium/data/2004_10/graphs/5i-l_e.php.

c Estimated by Global Forest Watch Canada (Edmonton) in a special run and analysis using satellite imagery and their GIS system.

d National Forestry Database Program, retrieved September 2, 2005 from the CCFM website http://www.nfdp.ccfm.org/compendium/data/2004_10/tables/com62e.htm.

e Estimated by Global Forest Watch Canada (Edmonton) in a special run and analysis using satellite imagery and their GIS system.

51 National Forestry Database Program, retrieved September 2, 2005 from the CCFM website http://nfdp.ccfm.org/compendium/data/2004_10/tables/tab82_m_e.php.

Table 12: Timber Harvest Volume and Area by Province for Canada’s Boreal/Taiga Ecozones, 2002a

Province Total Harvest: Percentage in Total Total Percentage Total Harvest:Roundwood Boreal/Taiga Roundwood Harvest: in Area in

Volumeb Ecozonesc Volume in Area Boreal/Taiga Boreal/Taiga(thousands Boreal/Taiga (hectares)d Ecozonese Ecozones

of cubic Ecozones (hectares)metres) (thousands

of cubicmetres)

British Columbia 73,638 2 1,473 189,277 5 9,464

Alberta 24,683 100 24,683 68,430 100 68,430

Saskatchewan 4,308 100 4,308 25,070 100 25,070

Manitoba 2,050 100 2,050 15,042 100 15,042

Ontario 26,191 95 24,881 184,643 95 175,411

Quebec 39,587 90 35,628 309,195 90 278,276

New Brunswick 10,107 0 0 105,834 0 0

Nova Scotia 6,038 0 0 49,959 0 0

Newfoundland 2,139 100 2,139 22,027 100 22,027

PrinceEdward Island 408 0 0 490 0 0

Yukon Territory 7 100 7 42 100 42

NorthwestTerritories 3 0 0 50 100 50

CANADA 189,159 50 95,170 969,569 61 593,811



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Along with the lack of data on timber harvest volumesor area of harvest within the boreal region, the BEWASaccount for forests is incomplete because it does notaccount for natural disturbance depletions (e.g., fire,insects, disease) or the volumes of timber depleted due to industrial development. Moreover, it is missinginformation on the annual growth rate of the borealforest’s timber.

4.2.1.2 Mining, and Oil and Gas Sector Market Value in the Boreal Region

Minerals and energy (oil, gas, and coal) reserves are asignificant form of marketable natural capital in theboreal region. We have included the value of these so-called subsoil assets in the BEWAS consistent withinternational natural resource accounting conven-tions.52 However, there are some who might disagreeon whether these subsoil assets should be consideredpart of the boreal ecosystem and the BEWAS.53 TheHandbook of National Accounting, Integrated Environmental andEconomic Accounting 2003 states that “subsoil (mineral andenergy) resources are inanimate and affect other envi-ronmental assets only indirectly in so far as activitiesassociated with mineral extraction disturb the naturalenvironment.”54 We adopted this Handbook convention.Weattempted to account for the level of stock of thesenon-renewable subsoil resources in physical terms, theeconomic life of reserves (i.e., the ratio of total reservesto the current depletion rate as a proxy for sustainabili-ty), and the resource rent value using the concept ofeconomic resource rent valuation methods (similar totimber resources).

On a physical scale, most of the Western CanadaSedimentary Basin—which contains 11.4 billion bar-rels of crude oil reserves,55 59.8 trillion cubic feet(Tcf) of natural gas, and the vast 300 billion barrelsof potentially recoverable reserves from Alberta’s oilsands—are in the boreal region.56 Coal reserves areestimated at 6,294 million tonnes. An indicator of theeconomic life of these reserves is the reserves-to-pro-duction ratio, which is the number of years a reservewould last at the current rate of production; for natural gas it is 10 years, for crude oil (excludingthe oil sands) it is 9 years, and for coal it is 84 years.

The boreal region is relatively rich in mineralresources. According to Global Forest Watch Canada,the primary metal deposits in the boreal regioninclude: lead-zinc (Yukon), gold (Yukon, BC, NWT,Manitoba, Ontario, Quebec, Newfoundland andLabrador), coal (Alberta), copper-zinc (Manitoba,Ontario, Quebec), uranium (Saskatchewan), nickel(Manitoba), platinum group (Ontario), asbestos(Quebec), iron ore (Quebec, Newfoundland andLabrador).The Boreal Shield ecozone alone producesabout 75 percent of the total Canadian production of iron ore, copper, nickel, gold, and silver.The BorealShield ecozone in northern Saskatchewan is the largestproducer of uranium in the world, accounting for 42 percent of the world’s uranium production.57

The total contribution of the mining, and oil and gasindustries to Canada’s GDP in 2002 was $32.6 billion,and in 2004 was $33.6 billion.58 An estimated 80 per-cent of Canada’s mining activity59 and 37 percent of

52 See the United Nations et al., Handbook, pp. 314-322.53 Ecological economist Tom Green (in an email of May 16, 2005, to Mark Anielski) argues that because mineral and energy resources are subsurface resources, they

should not be considered outside the BEWAS. He notes that such flows do not depend on the state/health/integrity of the boreal region.The boreal region couldbe made into a dead zone, and the oil and gas sector would still extract the non-renewable resource. Including such values, especially given their size, confuses thesignal provided by the BEWAS. If non-renewables are included, Green notes, then increased protection will show a drop in non-renewable receipts but an increasein ecosystem services, blurring the trade-off. The BEWAS should focus on the boreal region as a living ecosystem. While we acknowledge Green's concerns, wehave adopted the international conventions of environmental accounting outlined by the United Nations et al. Handbook.

54 United Nations et al., Handbook, p. 314.55 The estimated 11.4 billion barrels of crude oil consist of 3.3 billion barrels of conventional crude oil, 6.7 billion of oil sands, and 1.4 billion barrels of frontier oil.56 Lee, Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections, pp. 29-30.57 Personal communication with Peter Lee at Global Forest Watch Canada, March 30, 2005.58 Statistics Canada, retrieved September 2, 2005 from the Statistic Canada website http://www40.statcan.ca/l01/cst01/prim03.htm.59 Canadian Boreal Initiative. The Boreal in the Balance, p. 15. According to GFWC (personal communication with Peter Lee March 30, 2005), 80 communities in the

Boreal Shield ecozone supply 75 percent of Canada's iron, nickel, copper, gold, and silver. But, while mines provide employment and purchase goods and servicesin communities where they are located, the operations are strongly tied to commodity prices in a cyclical market. Populations in mining communities fluctuatedramatically. For example, between 1981 and 1991, Flin Flon, Manitoba, lost 26% of its population; Schefferville, Quebec, lost 85%; and Uranium City,Saskatchewan, lost almost its entire population (which dropped from 2,500 to less than 100). Also according to GFWC, in the boreal region there are approxi-mately 7,000 abandoned mines (Quebec = 800; Ontario = 3,000; Manitoba = 30-100; Alberta = 2,000;Yukon = 120; NWT = 37), 80 operating mines, 42closed and suspended mines, 66 acid-generating abandoned mines, and 25 projects that are in advanced exploration stages or are under development.


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petroleum (oil and gas) activitiesoccurred within the boreal region in2002.60 Therefore, we estimated that theGDP value for the mining, and oil andgas industries in the boreal region has a market value of $14.5 billion per year(2002$),61 or $24.87 per hectare basedon the total boreal land area.62

4.2.1.3 Hydroelectric Generation:Market Value in the Boreal Region

A recent study estimates the GDP valuefor hydroelectric generation in theBoreal Shield ecozone for the year 1991at $16.5 billion.63 Given that there areno current estimates of GDP related tohydroelectric generation, we used the$16.5 billion estimate for 1991 andindexed the figure to 2002 dollars,which equals $19.5 billion.64

The GDP-based market value of industri-

al activities, such as forestry, mining, andoil and gas, does not include many ofthe costs of development to society.Thefollowing costs are examples of the coststo society in terms of government sup-port to for-profit industries and costsassociated with the by-products or pol-lution resulting from industrial activities.The costs we have included are not com-prehensive across sectors, nor are theyfull estimates of the environmental costs.

4.2.2.1 Government Support Expenditures for the Mining Sector

One example of the internal costs thatare not accounted for in GDP reportingis government support expenditures.In Canada, government expenditures insupport of Canada’s mining industryhave been estimated at $580 millionper year (2000/2001; 2000$).65 Thisestimate includes the spending byBritish Columbia, Ontario, Quebec,and the Yukon Territory governments,as well as federal government expenditures. In effect, governmentexpenditures, which directly benefit agiven sector, are generally defined asdirect support payments or subsidies.In the case of the mining sector, suchexpenditures contribute directly to thefinancial bottom line and viability ofthe sector and must therefore be count-ed as such in a full cost accountingframework. When these expendituresare not accounted for (i.e., deductedfrom the GDP for the mining sector), anupward bias results in the market valueof the sector.Thus, our account recog-nizes estimated government expendi-tures as subsidies and deducts themfrom the GDP estimate for the borealregion. Given the assumption that anestimated 80 percent of total Canadianmining activity/ GDP takes place in theboreal region, government expendituresthat support the industry are an esti-mated $474 million (80 percent oftotal; 2002$).


Costing IndustrialDevelopment

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ity in terms of the industrial footprint of non-abandoned (i.e., most likely to be actively producing wells) well sitesand pipelines. In 2003, there were 280,947 non-abandoned (active) wells in Canada with a total of 461,627 totalwells ever developed between 1901 and June 2003). In the Boreal/Taiga ecozones, there are 102,950 non-abandoned(active) wells with a total of 182,558 wells ever developed between 1901 and June 2003.Therefore, the Boreal/Taigaecozones comprise 37% of all non-abandoned wells in Canada as of June 2003.The source for well sites data is thepetroleum and natural gas well sites national dataset obtained from IHS Energy, Calgary, Alberta (2003).

61 Calculated based on an estimated 80% of total Canadian mining activity/GDP in the boreal ecozones, covering thetotal boreal ecozone land mass.

62 584,079,000 hectares; data was retrieved September 2, 2005 from the CFS website see http://nfi.cfs.nrcan.gc.ca/canfi/data/classification-large_e.html.

63 Lee, Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections. Data on hydroelectric generation is onlyavailable for the Boreal Shield ecozone. Note that there is also hydroelectric generation in the Boreal Plain ecozone(e.g., Grand Rapids, Manitoba, and Tobin Lake, Saskatchewan).

64 A GDP chained, implicit price index was used throughout this study to standardize to 2002 dollars.65 M. Winfield, C. Coumans, J. Kuyek, and A.Taylor. Looking Beneath the Surface:An Assessment of Public Support for the Metal Mining

Industry in Canada. (Ottawa:The Pembina Institute for Appropriate Development and MiningWatch Canada, 2002);(2000$).

4.2.2 Costs of Industrial Development in the Boreal

The GDP based market value ofindustrial activities, such as forestry,mining and oil and gas, doesnot include many of the costs ofdevelopment to society.

For example, there is an estimated$11.1 billion in air pollution andgovernment subsidy costs associatedwith forestry, oil and gas, andmining sector activities; costs that should, in principle, bededucted from the market GDPvalue as environmental and socialcosts of development.



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4.2.2.2 Federal Government Support Expenditures for the Oil and Gas Sector

The Government of Canada provided a total of $8.3 billion (2000$) in expenditures to the oil andgas industry between 1996 and 2002, inclusive.During this period, expenditure on oil sands alone was an estimated $1.2 billion (2000$).66 In 2002alone, the federal government spent $1.5 billion(2000$) in subsidies to the oil and gas industry. Areported 36.6 percent of petroleum and natural gaswells67 in Canada are located in the boreal region.Therefore, based on the total federal government sup-port expenditures to the oil and gas sector in 2002,expenditures to industry in the boreal region are esti-mated at $541 million (36.6 percent of total; 2002$).

4.2.2.3 Carcinogens and Toxic Substance Releases by Industrial Sources in the Boreal Region

Environment Canada’s National Pollutant ReleaseInventory (NPRI) reports on industrial pollutantreleases and transfers within Canada. Using the 2002NPRI database and spatial analysis, we were able toextract data for the boreal region. Figure 3 shows amap of all the industrial sources of pollutants to air,land, and water in the boreal region.68 The number of NPRI release sites in Canada reported in 2002 was24,491, of which 5,209 were located in the Borealand Taiga ecozones.69

Figure 3: National Pollutant Release Inventory Sites in the Boreal Region, 2002

66 A.Taylor, M. Bramley, and M. Winfield. Government Spending on Canada's Oil and Gas Industry: Undermining Canada's Kyoto Commitment. (Drayton Valley, AB: Pembina Institute forAppropriate Development, 2005); includes tax, program, and direct expenditures.

67 Non-abandoned.68 The source of this data is Environment Canada. National Pollution Release Inventory (NPRI) 2002, retrieved September 2, 2005 from Environment Canada’s website

http://www.ec.gc.ca/pdb/npri/npri_home_e.cfm, with updates to the Location Table supplied by Environment Canada, NPRI Office, Prairie & Northern Region,March 14, 2005.

69 Boreal data were extracted using spatial analysis of the NPRI 2002.

Source: Spatial map developed by Global Forest Watch Canada based on NPRI geo-coded database.


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To determine which substances to consider in ouraccount of released carcinogens and toxics, we reliedon the definitions and datasets identified by the NorthAmerican Commission for Environmental Cooperation.70

It is important to note that there is overlap betweenthese two release categories; therefore, our account ofreleased carcinogens and toxics is not additive.

The total release of carcinogenic substances in theboreal region was approximately 3,080 tonnes asreported by the NPRI in 2002.The total release of toxicsubstances in the boreal region, as listed by theCanadian Environmental Protection Act (CEPA), wasapproximately 3,442 tonnes in 2002. The totalrelease of toxic substances listed by CEPA that werenot classified as carcinogens was 1,831 tonnes, includ-ing the substance mercury (3,045 kilograms, or 3.045tonnes).Therefore, the total release of carcinogens andtoxics in the region was an estimated 4,911 tonnes in2002 (see Table 13).

The health costs and ecosystem-related costs were notestimated due to the lack of information on the directeffects of each substance and their associated costs(i.e., illness treatment costs). However, health costsassociated with air pollution were estimated (seesection 4.2.2.4 Health Costs Associated with Air PollutantReleases).


70 Reference and data retrieved September 2, 2005 from the Taking Stock Query’s website http://www.takingstockquery.org/down2001/chemcats_en.html andhttp://www.takingstockquery.org/down2001/datasets_en.html.

Source: Environment Canada. National Pollution Release Inventory. 2002.http://www.ec.gc.ca/pdb/npri/npri_home_e.cfm, withupdates to the Location Table supplied by Environment Canada,NPRI Office, Prairie & Northern Region, March 14, 2005.

Note: *The total represents the total releases minus the overlap of the two substance categories (carcinogens and toxins).

** There are 24,491 records in the NPRI 2002 database.Withinthese, there are 239 records with unidentified locations.Locations were manually identified for 207 of these 239records, leaving 32 records with unidentified locations. It is alsoimportant to note that there are a number of “vagrant” records,which means that their locations are incorrect (e.g., in themiddle of the Great Lakes, cities/towns that are hundreds ofkilometres from their proper locations).

Table 13: 2002 NPRI Industrial Air Pollutant Releases Categorized as Carcinogens and Toxics in the Boreal

2002 NPRI Pollutant Releases **-Boreal RegionCarcinogens and Toxic Substance

Substance Category Total Releases(tonnes)

Carcinogens 3,080

Toxics 3,442

Overlap 1,611

Toxics not reported as carcinogens (includes mercury releases: 3,045 kg) 1,831

TOTAL 4,911 *G

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4.2.2.4 Health Costs Associated with Air Pollutant Releases

Based on our analysis of the 2002 NPRI, 1.4 million tonnes of air pollutants were released to the air by industrialfacilities located in the boreal region (see Table 14).71 Using estimates of the marginal external health costs of airpollution in rural Europe, which are reported by the European Commission, the health costs associated with therelease of pollutants to the air in the boreal region is an estimated $9.9 billion per year (2002$).72 Although thecost transferred is from a model based on the effects for rural Europe, the estimates of the health impacts for theemissions were typically up to 1,000 kilometres from the industrial site of emission.Therefore, the costs are suit-able for the boreal region, given that most facility locations are in the southern boreal region and that the proximi-ty of large population concentrations in the region and to the south of them is also typically within such a radius.

4.2.2.5 Cost of Pollution from the Mining Sector

According to a 2004 study, primary mineral produc-tion creates 7.2 percent of national greenhouse gasemissions, 40 percent of national sulphur dioxideemissions, and more than 95 percent of national solidwaste generation (650 million tonnes per year, at least20 percent of which is toxic).73 Further analysis isneeded to compile comprehensive data for mining sector pollution costs, and therefore no cost estimateshave been included in this study.

4.2.2.6 Cost of Fossil Fuel Use by the Forest Products Sector

According to Apps and colleagues, approximately14 million tonnes of carbon is released each year dueto fossil fuel use by the forest products sector (90 per-cent from the pulp and paper sector).74 Carbon emis-sions due to fossil fuel use by the forest sector are notincluded in the Forest Carbon Budget because ofInternational Panel on Climate Change (IPCC) guide-lines. However, from a full cost accounting perspective,the cost of carbon released during forest product

Source: Environment Canada. National Pollution Release Inventory. Data retrieved September 2, 2005 from Environment Canada’s website 2002.http://www.ec.gc.ca/pdb/npri/npri_home_e.cfm, with updates to the Location Table supplied by Environment Canada, NPRIOffice, Prairie & Northern Region, March 14, 2005.

Note:Cost is an average of the estimated marginal human health costs of air pollution in rural areas from 15 European countries.There are24,491 records in the NPRI 2002 database.Within these, there are 239 records with unidentified locations. Locations were manually identi-fied for 207 of these 239 records, leaving 32 records with unidentified locations. It is also important to note that there are a number of“vagrant” records, which means that their locations are incorrect (e.g., in the middle of the Great Lakes, cities/towns that are hundreds ofkilometres from their proper locations).

71 Boreal data were extracted using spatial analysis of the NPRI 2002.They include 180,824 tonnes of NO2; 1,129,108 tonnes of SO2; 22,406 tonnes of PM2.5; and

78,668 tonnes of VOC.72 Mike Holland and Paul Watkiss. Estimates of the Marginal External Health Costs of Air Pollution in Europe: BeTa Version E1.02a. Created for the European Commission DG

Environment by netcen, http://europa.eu.int/comm/environment/enveco/air/betaec02a.pdf. Results reflect the impact of emissions up to a range of, typically,1000 kilometres from the site of emission. Modelling work undertaken in the ExternE Project has suggested that this is sufficient to capture 95% of the damagesassociated with emissions.The original method for calculating the estimates that have been adapted for this study were based on the ExternE methodology(European Commission, 1998).This follows the “impact pathway approach,” tracing emissions through dispersion and environmental chemistry, to exposure ofsensitive receptors, health impacts (calculated using exposure-response functions), and economic valuation using the willingness to pay (WTP) approach.Theresults for the core analysis presented in this database have been updated to follow some changes to functions, etc. since 1998, and EC DG Environment's preferredapproach to economic valuation of mortality, based on a starting point estimate of the value of statistical life of $1 million.

73 Lee, Boreal Canada: State of the Ecosystem, State of Industry, Emerging Issues and Projections, p. 33.74 M. J. Apps, W. A. Kurz, S. J. Beukema, and J. S. Bhatti. “Carbon Budget of the Canadian Forest Product Sector,” Environmental Science and Policy 2 (1999): pp. 25-41.

Table 14: 2002 NPRI Industrial Air Pollutant Releases in the Boreal Region

Total 2002 NPRI Air Pollutant Releases-Boreal Region

Substance Total Releases (tonnes) External Costs (millions, 2000$) Cost/Substance ($/tonne)NO2 180,824 1,478.18 8,174.70

SO2 1,129,108 7,455.09 6,602.64

PM2.5 22,406 493.13 22,008.80

VOC 78,668 259.71 3,301.32

Total 1,411,006 9,686.11

Total (2002$) 9,897.28


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Note: * included in subsistence values for Aboriginal households of $575.1 million; ** included in flood control, water filtering, and biodiversityvalue; *** included in the forest ecosystem, recreation ecosystem function economic value estimate.

Table 15: Boreal Ecosystem Service Value Accounts

Ecosystem Ecosystem Function Ecosystem Service Annual Non-Value Assessed Market Flow

Value Estimates(millions, 2002$)

Forests Atmospheric and climate Annual net carbon sequestration (excludes peatlands); $1,852 stabilization carbon storage (i.e., stock value) is an estimated

$849.2 billion

Water stabilization and water supply Watershed service: municipal water use (cubic $18metres/year [database incomplete])

Raw materials * Subsistence value for Aboriginal communities and $575households

* Non-timber forest products (mushrooms, berries, $79and wild rice)

Genetic resources * Biodiversity: value of pest control by birds $5,401* Biodiversity: passive value—willingness to pay $12

(WTP) for conservation

Recreation Economic value to Canadians from recreation- $4,484related activities

Cultural Included in subsistence values for Aboriginal *communities and households

Wetlands Atmospheric and climate Annual carbon sequestration; carbon storage $383and peatlands stabilization (peatlands) (i.e., stock value) is an estimated $349.1 billion

Disturbance avoidance (peatlands) Flood control and water filtering $76,998

Disturbance avoidance (non- Flood control, water filtering, and biodiversity value $3,372peatland wetlands)

Water stabilization and water supply **

Erosion control and sediment **retention

Raw materials Included in subsistence values for Aboriginal *communities and households

Genetic resources Included in flood control, water filtering, and **biodiversity value

Recreation Included in the economic value to Canadians from ***recreation-related activities

Cultural Part of subsistence values for Aboriginal *communities and households

Lakes, rivers, Raw materials Included in subsistence values for Aboriginal *riparian zones communities and households

Recreation Included in the economic value to Canadians from ***recreation-related activities

Cultural Included in subsistence values for Aboriginal *communities and households

Undeveloped Cultural Included in the economic value to Canadians from *lands recreation-related activities

TOTAL Non-Market Value of Boreal Ecosystem Services (flow values only) $93,174 million;$159.52/hectare/year



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processing (i.e., related to energy use) should bededucted from the forestry GDP.The costs of carbonreleased from fossil fuel use by other industrial sectorsshould also be accounted for. Based on the assumptionthat 60 percent of Canada’s forestry GDP is from theboreal region, the estimated cost of carbon releaseddue to fossil fuel use is $150 million per year(2002$).75

Table 15 (previous page) provides a summary of theeconomic values we estimated for the boreal region's ecosystem services.

These estimated values reflect the current economic valueof conserving boreal ecosystems in an integral, or intact,state.The total estimated non-market value of borealecosystem services is estimated at $93.2 billion for theyear 2002, or $159.52 per hectare.The bottom line ofour analysis reveals that when we compare the marketand non-market values for 2002, the total non-marketvalue of boreal ecosystem services is 2.5 times greaterthan the net market value of boreal natural capital extrac-tion.The type of valuation and the sources for these val-ues are discussed in the following sections of this study.

4.2.3.1 Total Boreal Forest Ecosystem Service Values

The total forest ecosystem service values for Canada’sboreal region are estimated as follows: $849.2 billionfor carbon stored, plus $12.4 billion per year in totalfor all other values ($3509.31 per hectare for carbonstorage and $51.24 per hectare per year for all othervalues; in 2002$; see Table 16), including the value of nature-related activities ($4.5 billion per year) out-lined below in the section 4.2.3.6 The Value of Nature-BasedRecreation in Canada’s Boreal Region. The details of each type of boreal forest ecological good and service isdescribed in greater detail in the following sections.

4.2.3.1.1 Boreal Forest Ecosystem Area and Carbon Estimates

Canada’s National Forest Inventory (CanFI) for 2001reports that the total stock of forest land in the borealregion is 241,985,000 hectares (includes Boreal andTaiga ecozones).The forest area by ecozone is reportedin Table 17.The carbon content stored in forest bio-mass and soil has been estimated based on the carbonestimates reported by Kurz and Apps’ Carbon BudgetModel of Canada’s Forests.76

4.2.3 The Economic Values of Boreal Ecosystem Services

75 This assumes that 60% of forest GDP occurs in the boreal region.Therefore, 60% of the carbon released is valued using the replacement cost of carbon byafforestation ($17.50 per tonne) from S. N. Kulshreshtha, S. Lac, M. Johnston, and C. Kinar, Carbon Sequestration in Protected Areas of Canada:An Economic Valuation. (Saskatoon,SK: University of Saskatchewan, Department of Agricultural Economics, 2000).

76 W. A. Kurz and M. J. Apps. “A 70-Year Retrospective Analysis of Carbon Fluxes in the Canadian Forest Sector,” Ecological Applications 92, no. 2 (1999): pp. 526-541.

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a A GDP chained, implicit price index was used throughout report to standardize to 2002 dollars.

b See section 4.2.3.6 The Value of Nature-Based Recreation in Canada's Boreal Region; nature-related activities value per hectare per year is calculated using the total boreal forest land base.

Note: Carbon estimates exclude peatlands.

a Canadian Forest Service. Canadian Forest Inventory (CanFI 2001), http://nfi.cfs.nrcan.gc.ca/canfi/data/classification-large_e.html.

b Forest ecosystem carbon storage estimates calculated using carbon storage estimates by ecozone for 1990-1994, from Kurz and Apps (1999) Carbon Budget Model of Canada's Forests, as reported by the Canadian Council of Forest Ministers. Criteria and Indicators of Sustainable ForestManagement in Canada: National Status 2000 (Ottawa: Natural Resources Canada—Canadian Forest Service, 2000), Criterion 4,http://www.ccfm.org/pi/4_e.html; total forest carbon storage was converted to carbon storage per hectare by ecoclimatic province and thenapplied to CanFI 2001 forest area data by ecozone.

Table 16: Summary of Canada’s Boreal Forest Ecosystem Service Values (Current Estimated Valuesof Conserving Natural Capital in Canada’s Boreal Region)

Type of Good or Service Total Forest Total Value Value per Hectare (2002$)Land Area (billions, 2002$)(hectares)

Forest carbon storage value- 241,985,000 $333.5 (carbon trading); $1,500stock value (excluding peatlands) $849.2 (replacement cost); $3,227

$2,659 (insurance sector $10,989damage costs)

Forest carbon sequestration 241,985,000 $1.85/year $7.03/yearvalue-annual flow value (excludingpeatlands)

Forest watershed value (municipal) $0.0184/year

Forest non-timber forest products $0.079/yearcommercial value (mushrooms,berries, and wild rice)

Forest birds-pest control service $5.4 $21.84

Forest: Aboriginal subsistence value $0.26 to $0.58/year $5,000 to $11,000/household/year (2000$)

Passive values: biodiversity conservation $0.012/year $16.81/household/year(50% of boreal household WTP)

Nature-related activities (all ecosystems) 241,985,000 $4.5/year $18.53/yearb

TOTAL $849.2 (carbon storage) plus $3,509.31 (carbon storage)$12.4/year (all other values) plus $51.24/year (all other

values)

Table 17: Canada’s Boreal Forest Area and Carbon Storage Estimates by Ecozone

Ecozone Ecoclimatic Areaa Carbon Content Estimatesb

Province (millions of hectares) (millions of tonnes of carbon)

Biomass Soil Ecosystem

Taiga Plains Subarctic 27.9 491 6,781 7,272

Taiga Shield Subarctic 36.7 646 8,922 9,568

Boreal Shield Boreal east 119.8 2,292 16,942 19,234

Boreal Plains Boreal west 36.1 1,146 4,955 6,101

Taiga Cordillera Subarctic 1.1 19 262 281

Boreal Cordillera Cordilleran 14.5 1,189 2,903 4,092

Hudson Plains Boreal east 5.9 113 832 945

Total Boreal ecozones 242.0 5,897 41,596 47,493



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The total carbon stored per hectare from their model isreported by the Canadian Council of Forest Ministersreport: Criteria and Indicators of Sustainable Forest Management inCanada: National Status 2000,77 which was used to calculatethe carbon content estimates. As a result, the total car-bon stored in boreal forests is an estimated 47.5 billiontonnes (see Table 17).

4.2.3.1.2 The Value of Climate Regulation: Carbon Storage

Trees help regulate climate by trapping moisture andcooling Earth’s surface. For example, computer simula-tions estimate that 100 million mature trees in UScities could save as much as US$2 billion per year inheating and cooling energy costs.78 Information onurban forests and urban trees for the boreal region is not available; therefore, no value for local urban climate regulation has been estimated.

On a global level, forest vegetation and soils captureand store atmospheric carbon dioxide; therefore, theyplay a significant role in the global carbon cycle andhave the potential to affect climate change. For exam-ple, in the United States, the Forest Service has estimat-ed that forest carbon sequestration services yield bene-fits of US$65 per ton, or a total of US$3.4 billionannually for all US forests.79 Forests absorb carbondioxide (CO2) from the atmosphere, convert it to carbohydrates (mainly carbon), and store it in roots,leaves, branches, and trunks.This process is called photosynthesis, the principal natural mechanism forremoving CO2 from the atmosphere.Trees release carbon when they become diseased, as they decay, orwhen they are killed by fire. However, even when theyburn, trees release carbon slowly. Only a small portion

is released immediately. Most of the carbon goes to the forest floor and into the soil, where it decomposesover a much longer period of time.The whole processof carbon uptake, release to the atmosphere, carbonflow to soil and biomass components is called the carbon cycle.

In valuing carbon, it is important to distinguishbetween the carbon stored within the biomass andsoil of existing forest ecosystems and the annual car-bon sequestered as a forest grows. In the case of car-bon storage, much of the value of carbon is lost if theforest is burned or logged, depending on subsequentland use and the type of forest products (i.e., the life-time of the product). Carbon sequestration refers sole-ly to the annual net fixation of carbon as a forestgrows.

The value of carbon (C) can be estimated by several different methods. First, a significant number of studiesbase the value of carbon on the cost of climate changeto society, namely the damage costs of climate change.80

A recent review by Clarkson suggests a consensus valueof US$34 per tonne of carbon (Cdn$40.95/tC).81 Tol et al. also reviewed studies reporting an upper costestimate of marginal damage valued at US$50 per tonneof carbon (Cdn$60.22/tC).82 As a result, the UNConvention on Biological Diversity suggests usinga range of US$34 to US$50 per tonne of carbon(Cdn$40.95 to Cdn$60.22/tC).83 The risk of futuredamages due to predicted climate change has also beenestimated by the global insurance sector. Munich Re, aglobal reinsurer, has estimated that the cost of climatechange will be $304.2 billion per year by the end ofthis decade (approximately Cdn$55.42/tC).84

77 Canadian Council of Forest Ministers. Criteria and Indicators of Sustainable Forest Management in Canada: National Status 2000 (Ottawa: Natural Resources Canada, Canadian ForestService, 2000), Criterion 4, http://www.ccfm.org/pi/4_e.htmlhttp://www.ccfm.org/ci/pdf/ns2k/ci_4_e.pdf.

78 J. F. Dwyer, E. G. McPherson, H.W. Schroeder, and R. A. Rowntree. “Assessing the Benefits and Costs of the Urban Forest,” Journal of Arboriculture 18 (1992): pp. 227-234.79 B. Dunkiel and S. Sugarman. Complaint for Declaratory, Mandatory, and Injunctive Relief. United States District Court for the District of Vermont. Burlington,Vermont, 1998; reported in D. J.

Kreiger.The Economic Value of Forest Ecosystem Services: A Review (Washington, DC:The Wilderness Society, 2001).80 Secretariat of the Convention on Biological Diversity. The Value of Forest Ecosystems, Technical Series #4. (Montreal: Secretariat of the Convention on Biological Diversity,

2001). Carbon storage and sequestration, p. 23+.81 R. Clarkson. Estimating the Social Cost of Carbon Emissions (London: Department of the Environment,Transport and the Regions, 2000). (Conversion rate for US dollars to

Cdn dollars is median price = 1.20440 [bid/ask], Friday March 11, 2005. From FXConvertertm: Classic 164 Currency Converter © 1997-2005 by OANDA.com,http://www.oanda.com/convert/classic.)

82 R.Tol, S. Fankhauser, R. Richels, and J. Smith. “How Much damage Will Climate Change Do? Recent Estimates,” World Economics 1 (2000): pp. 179-206. (Conversionrate for US dollars to Cdn dollars is median price = 1.20440 [bid/ask], Friday March 11, 2005. From FXConverterTM: Classic 164 Currency Converter © 1997-2005 by OANDA.com, http://www.oanda.com/convert/classic.)

83 Secretariat of the Convention on Biological Diversity. The Value of Forest Ecosystems (Conversion rate for US dollars to Cdn dollars is median price = 1.20440 [bid/ask],Friday March 11, 2005. From FXConverterTM: Classic 164 Currency Converter © 1997-2005 by OANDA.com, http://www.oanda.com/convert/classic.)

84 The global cost estimate is reported by United Nations Environment Programme. “Impact of Climate Change to Cost the World $US 300 Billion a Year,” newsrelease, February 3, 2001. Cost per tonne per year is total global cost divided by global carbon emissions (year 2000; 6.611 billion tonnes),http://www.unep.org/Documents/Default.Print.asp?DocumentID=192&ArticleID=2758.The value per tonne of carbon is estimated based on the total annual cost,$304.2 billion and the total 2000 global carbon emissions due to fossil fuel use: 6.611 billion tonnes; see G. Marland,T. A. Boden, and R. J. Andres. “Global,Regional and National CO2 Emissions,” in Trends:A Compendium of Data on Global Change (Oak Ridge,TN: Carbon Dioxide Information Analysis Centre, Oak Ridge National

Laboratory, US Department of Energy, 2003). (Conversion rate for US dollars to Cdn dollars is median price = 1.20440 [bid/ask], Friday March 11, 2005. FromFXConverterTM: Classic 164 Currency Converter © 1997-2005 by OANDA.com, http://www.oanda.com/convert/classic.)


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Second, the cost of climate change canalso be estimated based on carbon fees.All Scandinavian countries have intro-duced a carbon fee (i.e., a tax) on fossilfuel to reduce the emission of the cli-mate gas CO2. Solberg uses Norway’scarbon fee (approximately US$49/tCO2,or Cdn$16.08/tC) as a proxy for thesocial cost of fossil fuels.85 Solbergexplains that the fee is an emission costthat provides a corresponding benefit forabsorbing atmospheric CO2 in forestbiomass. His study shows that this bene-fit corresponds to a net economic valueof carbon sequestration in forest biomass2 to 30 times higher, depending oninterest rate used, than the net value oftimber as raw material for the forestindustry in Norway (which has one ofthe highest timber prices in the world).Solberg notes that in order to stabilizethe CO2 emissions in Norway, the fee onCO2 emissions would be at least twice ashigh as the above estimates.

Third, the value of carbon can be esti-mated based on replacement costs. Arecent University of Saskatchewan studythat assessed the carbon sequestered inprotected areas in Canada reviewed sev-eral approaches to carbon valuation,including the alternative cost method,the marginal social opportunity costmethod, the quasi-market method, thereplacement cost method, and the sub-stitute cost method.The authors selectedtwo conservative median values.The firstmedian value ($17.50/tC) was based onthe replacement cost of carbon (i.e.,afforestation on marginal agricultural

land). The second median value($16.25/tC) was based on the substitutecost of carbon (i.e., reforestation).86

Fourth, the value of carbon can be esti-mated based on carbon credit trading.Trading value in a “carbon market”refers to the sums of money that corpo-rations or governments are willing toinvest to sequester carbon or prevent itsemission. It was estimated that withoutlimitations on worldwide carbon trading,carbon credits would exchange at justunder US$10 per tonne of carbon.87

Currently, the price for one carbonallowance in the European market isapproximately 17.37 euros per tonne of CO2, which equates to Cdn$27.45per tonne of CO2 or Cdn$7.48 pertonne of carbon.88

Lastly, the value of carbon can beestimated based on the cost of timberincome forgone in lieu of protectingthe carbon stored in forest ecosystems.Haener and Adamowicz estimated thevalue of carbon sink functions for aboreal forest management area inAlberta, Canada. They calculated the carbon sequestered per tonne of netchange in biomass after harvest, landuse changes, and fire, using Hulkrantz’sapproach, which estimates the opportu-nity costs of storing fixed carbon as thetimber income forgone. Haener andAdamowicz used a range of values from$0.34 to $16.60 per tonne of carbon(1996$) relative to the annual net carbon sequestered.89


The Value of Carbon

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nz85 B. Solberg. “Forest Biomass as Carbon Sink—Economic Value and Forest Management/Policy Implications,” Special

Issue, Critical Reviews in Environmental Science and Technology 27, 1997. In Norway, the fee is 0.82 NOK (or about US$0.12)per litre of gasoline, equivalent to 343 NOK (or US$49) per ton CO2 (Conversion rate for US dollars to Cdn dollars is

median price = 1.20440 [bid/ask], Friday March 11, 2005. From FXConverter(tm): Classic 164 Currency Converter©1997-2005 by OANDA.com, http://www.oanda.com/convert/classic.)

86 Kulshreshtha et al. Carbon Sequestration in Protected Areas of Canada.87 Note: this may change with the implementation of the Kyoto Protocol.88 European Union Price Assessment for carbon emissions trading, April 4, 2005, http://pointcarbon.com (global

provider of independent analysis, news, market intelligence, and forecasting for emerging carbon emission markets).Since April, there has been an upward trend in the price of carbon trading according to the European Union PriceAssessment. On March 24, 2005, the trading price was 14.11 euros/tCO2 (Cdn$6.07/tC) and on May 31, 2005, the

trading price was 19.60 euros/tCO2 (Cdn$8.44/tC). (Conversion rate for euros to Cdn dollars is median price =

1.58004 [bid/ask]; Friday March 28, 2005. From FXConverterTM: Classic 164 Currency Converter © 1997-2005 by OANDA.com, http://www.oanda.com/convert/classic.)

89 M. K. Haener and W. L. Adamowicz. “Regional Forest Resource Accounting: A Northern Alberta Case Study,” CanadianJournal of Forestry Research 30 (2000): pp. 264-273.

The importance of ecosystems as astore or deposit of carbon is signifi-cant not only to Canada’s futurewell-being, but to citizens across theglobe. We have estimated that, forexample, Canada’s boreal regionholds the equivalent of 303 years ofCanada’s total carbon emission in2002, or 7.8 years of the world’s totalcarbon emissions (67 billion tonnesof carbon, including forests andpeatlands).91 If reinsurance companyMunich Re were to apply a shadowvalue to the total carbon stored byCanada’s boreal region, then thecompany might estimate the borealregion’s “carbon bank account”(including both forests and peat-lands) to be worth $3.7 trillion ($55.42 per tonne of carbon). Whilethis is hypothetical, it does point tothe important value of carbon stores.

The value of Canada’s boreal forestas a sustained storehouse of carbon,and its continued vitality and capaci-ty to absorb anthropogenic emis-sions of carbon annually are criticalto the well-being of all of humanity,not just Canadians. Indeed, theworld may be willing to pay a pricefor ensuring Canada’s boreal carbonbudget remains healthy and in a netsurplus (net sink) condition.



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a Estimated carbon based on Canada's Forest Inventory, 2001 (forest land only). All figures in Canadian dollars. Forest carbon estimates based onstocked forest land area for Boreal and Taiga ecozones.The total area used is 212,156,000 ha (http://nfi.cfs.nrcan.gc.ca/canfi/data/ecozones-small_e.html); and the estimated carbon content for the ecosystem is 36,215,029,000 tonnes of carbon (includes aboveground and below-ground biomass and dead organic matter).The biomass conversion estimates are from the Carbon Budget Model of Canada's Forests (BorealWest estimates).

b Note that value per hectare is calculated using estimated value divided by the boreal forest land base (241,985,000 hectares).

Table 18: Estimated Values for Forest Ecosystem Carbon Stored in Canada’s Boreal Forestsa

Carbon Valuation Method Value per Tonne of Total Value Value per Hectare(author[s] of study) Carbon (billions, 2002$) (2002$)b

Market Price

Carbon emissions trading price $ $ 7.48 (2005$) $333.5 $1,500(EU assessment value; April 4,2005)

Replacement Cost

Replacement cost of afforestation $17.50 (2000$) $849.2 $3,227on marginal agricultural land-median value (Kulshreshtha etal. 2000)

Carbon Tax as Proxy

Norway’s carbon fee on fossil fuel $16.08 (1997$) $823.3 $3,402emissions as proxy of social cost(Solberg 1997; US$49/tCO2)

Climate Change Damage as Risk to Global Insurance Sector

Estimated cost of damages due $55.42 (2001$) $2,659.0 $10,989to climate change as risk to global insurance sector (Munich Re/UNEP FI 2001)

Social Value for Costs of Climate Change

UNEP global climate change $40.95 (2000$) $1,987.3 $8,212damage estimate (Clarkson 2000)

Opportunity Cost of Timber Income Forgone

Estimated average opportunity $8.47 (2000$) $411.0 $1,699cost of timber income forgone (Haener and Adamowicz 2000)

RANGE OF CARBON VALUES

Total Range of Values $7.48 to $55.42 $333.5 to $2,659.0 $1,500 to $10,989


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Using the above sources, a range of values for carboncan be compiled to represent the market (i.e., carbonemissions trading) and non-market values (i.e., socialcosts, predicted damage costs; see Table 18).The valuesper tonne of carbon can be applied to estimate a valuefor the 47.5 billion tonnes of carbon stored in theboreal forest.90 Based on the trading price for carbon,reported as the European Union Price Assessment($7.48/tC), the boreal forest’s total value for carbonstored is $333.5 billion ($1,500 per hectare). If theopportunity cost of the timber income forgone is usedas a proxy for the value of carbon stored in the borealforest, it would be worth $411.0 billion ($1,699 perhectare). Using the replacement cost of carbon throughafforestation on marginal agricultural land, the totalvalue of carbon stored is worth $849.2 billion($3,227 per hectare). Similarly, the value of carbonstored by Canada’s boreal forest is worth $823.3 bil-lion ($3,402 per hectare) using Norway’s carbon taxon the emission of CO2 as a proxy. Based on the costof climate change damages as forecast by the globalreinsurance sector as a proxy, the value of the carbonstored in the boreal forest ecosystems is an estimated$2.7 trillion ($10,989 per hectare). In this last case,the value of carbon stored is significantly higher.

Therefore, the value of the carbon stored by Canada’sboreal forests ranges from $333.5 billion to $2.7 tril-lion, or $1,500 to $10,989 per hectare, depending onthe method used to estimate the value of carbon (seeTable 18). It can be argued that some of the carbonvalues are additive. For example, the opportunity costof timber income forgone only accounts for the loss intimber value if the carbon store (i.e., the forest area) isprotected. However, the potential cost to society orglobal risk due to climate change damages is notincluded. In conclusion, we use a median value basedon the replacement cost through afforestation as aconservative estimate for carbon valuation.Thus, thevalue of the boreal forest’s carbon storage is an estimated $849.2 billion.

The full value of carbon stored by the boreal regionincludes peatlands, which are reported separately in the wetlands section (see section 4.2.3.5 The Value of BorealWetland Ecosystem Services; and Table 23).The importance ofecosystems as a store or deposit of carbon is significant

not only to Canada’s future well-being, but to citizensacross the globe. We have estimated that, for example,Canada’s boreal region holds the equivalent of 303years of Canada’s total carbon emission in 2002, or 7.8years of the world’s total carbon emissions (67 billiontonnes of carbon, including forests and peatlands).91 Ifreinsurance company Munich Re were to apply a shad-ow value to the total carbon stored by Canada’s borealregion, then the company might estimate the borealregion’s “carbon bank account” (including both forestsand peatlands) to be worth $3.7 trillion ($55.42 pertonne of carbon). While this is hypothetical, it doespoint to the important value of carbon stores.

The value of Canada’s boreal forest as a sustained store-house of carbon, and its continued vitality and capacity to absorb anthropogenic emissions of carbon annuallyare critical to the well-being of all of humanity, not justCanadians. Indeed, the world may be willing to pay aprice for ensuring Canada’s boreal carbon budget remainshealthy and in a net surplus (net sink) condition.

4.2.3.1.3 The Value of Climate Regulation: Carbon Sequestration

Forests can act as either sinks, or sources, of atmos-pheric carbon in terms of the net annual flux of carbon amongst the various pools of carbon (i.e.,biomass, soils, and atmosphere). Natural and human disturbance determine much of the amount of carbonexchanged. For example, the amount of carbon annu-ally sequestered by and stored in forest ecosystems isstrongly influenced by age distribution, growthprocesses, fire, insects, disease, and harvest. Whereasthe carbon stored by an ecosystem is determined at a certain point in time based on the estimated carbonheld in biomass and soils, the annual net carbonsequestered is the estimated net carbon taken up bybiomass and soils each year after carbon release andcarbon intake are accounted for.

Although the development of the Carbon BudgetModel of Canada’s Forests is not yet complete, currentestimates of Canada’s forest carbon budget based onthe CBM-CFS2 simulation model have been modelledfor the period from 1920 to 1994.92 During this peri-od, Canada’s forests were an overall sink for atmos-pheric carbon, averaging 173 million tonnes of carbon


90 Forest ecosystem carbon storage estimate calculated using carbon storage estimates by ecozone for 1990-1994, from W. A. Kurz and M. J. Apps. “The Carbon BudgetModel of the Canadian Forest Sector,” Ecological Applications 9 (1999): 526-547, as reported by the Canadian Council of Forest Ministers. Criteria and Indicators of SustainableForest Management in Canada.

91 An estimated 47,493 million tonnes of carbon is stored in the ecosystem (biomass, soil, etc.) versus 156.9 million tonnes of carbon emitted by Canada in 2002.92 An updated and more comprehensive model is currently being developed by the Canadian Forest Service.



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per year.93 However, the magnitude of the sink hasbeen steadily declining. Kurz and Apps estimate thatCanadian forests may have been a net source of CO2to the atmosphere after approximately 1980.94 Forexample, between 1985 and 1989, Canadian forestecosystems lost, on average, an estimated 69 milliontonnes of carbon per year due to an increase in disturbances.

Furthermore, the carbon budget model indicates thatCanada’s boreal and subarctic forests were a net sinkfor carbon averaged over the simulation period, butthey became a source of atmospheric carbon duringthe 1980s.95 This change is mostly due to a largeincrease in fire and insect disturbances. Kurz and Appsindicated initially that harvesting played a small role in this change. However, more recent work shows thatnot all of the loss in carbon went to the atmosphere.An estimated 25 million tonnes of carbon per year has accumulated in forest product pools, resulting in a lower net release to the atmosphere of about 44 million tonnes of carbon per year during this period.96

In addition, a 1995 study analyzed the future carbonbudgets of the Canadian boreal forests.97 Over a 50-year simulation, the carbon budget of six scenarios for the boreal region ranged from a net source of 1.4 billion tonnes of carbon to a net sink of 9.2 billiontonnes of carbon, based on different assumptions ofnatural disturbances, rates of reforestation of disturbedland, and conversion of non-stocked to productiveforest stands.

Estimates of the average net annual sequestration ratein the boreal and subarctic forest carbon pools werenot available in the published literature for the simula-tion period (1920 to 1994). Therefore, the Canadaaverage, 173 million tonnes of carbon per year, wasused to establish an average of 0.428 tonnes of carbonper hectare per year. We applied a range of carbon values, (outlined in section 4.2.3.1.2 The Value of ClimateRegulation: Carbon Storage), to determine the annual netforest ecosystem carbon sequestration value. Usingthe European Union carbon trading price, cost ofreplacement value through afforestation, and the

global cost estimate for the cost of climate changedamages, the value, per hectare per year for carbonsequestration are $3.27, $7.03, and $23.96,respectively (2002$). Extrapolated to the boreal forest (242 million hectares), the total annual value is $791.3 million, $1.85 billion, and $5.8 billion,respectively (2002$).

We used the median value based on the replacementcost of carbon through afforestation to calculate theoverall boreal ecosystem service values.Therefore, weadopted the total value of $1.85 billion per year. If weuse the future scenario estimates for carbon sequestra-tion rates over the next 50 years, then the value for the boreal region would range from a cost of $25 billion to a benefit of $162.7 billion (2002$).

4.2.3.1.4 The Value of Boreal Forest Watershed Services

Forested watersheds capture and store water, servicesthat contribute to the quantity of water available, andthe seasonal flow of water.They also help purify waterby stabilizing soils and filtering contaminants. Theseservices are important for agriculture, electricity gener-ation, municipal water supplies, recreation, and habitatfor fish and other wildlife species. Estimates for waterquantity values focus primarily on stream flow andrange from US$0.26 per acre-foot for electricitygeneration to as much as US$50 per acre-foot forirrigation and municipal use.98

Water quality is very important for municipal uses.For example, the US Environmental Protection Agencyestimates that 3,400 public water systems serving 60million people obtain their water from forested water-sheds.The value of the purification services providedby forested watersheds is reflected in the costs thatcommunities incur to protect their watersheds. Forexample, in 1997, New York City opted to investUS$1.5 billion in capital costs to protect the naturalfiltration system provided by the 80,000 acre forestedwatershed and the drinking water supply for nearly 10 million people, rather than construct an artificialwater filtration plant estimated to cost as much asUS$6 to US$8 billion plus annual maintenance costs

93 Canadian Council of Forest Ministers. Criteria and Indicators of Sustainable Forest Management in Canada.94 W. A. Kurz and M. J. Apps. “A 70-Year Retrospective Analysis of Carbon Fluxes in the Canadian Forest Sector,” Ecological Applications 9 (1999): 526-547.95 Canadian Council of Forest Ministers. Criteria and Indicators of Sustainable Forest Management in Canada:Technical Report 1997 (Ottawa: Natural Resources

Canada, Canadian Forest Service, 1996), Element 4.1, http://www.ccfm.org/ci/tech_e.html.96 Apps et al., “Carbon Budget of the Canadian Forest Product Sector.”97 W. A. Kurz, and M. J. Apps. “An Analysis of Canadian Boreal Forests,” Water,Air, and Soil Pollution 82 (1995): pp. 321-331.98 J. Sedell, M. Sharpe, D. Dravnieks Apple, M. Copenhagen, and M. Furniss. Water and the Forest Service. FS-660. (Washington, DC: United States Department of

Agriculture, Forest Service, 2000). Recreational use: $10 per acre-foot or less.


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99 Daily, G.C., and Ellison, K. 2002.The New Economy of Nature:The Quest to Make Conservation Profitable. Island Press.Washington, D.C.; Kreiger, The Economic Value of ForestEcosystem Services.

100 Municipal Water Use Database (MUD), 2001.The Canada-wide MUD dataset of 1,963 communities is missing geo-coordinates for 986 of those communities. GFWC man-aged to link the dataset to other datasets on populated places, but only could reduce that deficiency by 129, leaving 848 communities with no geo-coordinates. GFWC thenextracted those communities within the Boreal/Taiga ecozones.These 269 communities represent a total population of 1,426,535 people and represent a total municipalwater flow of 368,052,501 cubic metres3 per year.

101 Sedell et al., Water and the Forest Service.102 K. Moskowitz and J.Talberth. The Economic Case Against Logging Our National Forests. Forest Guardians. Santa Fe, NM, 1998.103 J. F. Dwyer, E. G. McPherson, H.W. Schroeder, and R.A. Rowntree. “Assessing the Benefits and Costs of the Urban Forest,” Journal of Arboriculture 18 (1992): pp. 227-234.

of US$300 to US$500 million.99 As a result, the upstatewatershed natural systems that had delivered excep-tionally pure water for more than a century continueto supply New York’s tap water without having to passthrough a filtration plant.

Based on results from our spatial analysis of EnvironmentCanada’s Municipal Use Database (MUD), we extractedthe value of municipal water use in communities in theboreal region.100 The total municipal water use is an esti-mated 368.1 million cubic metres per year for the borealregion (population of 1,426,535). Unfortunately, thegeocoding of the MUD is currently incomplete and,therefore, the total water use and the value of municipalwater use are underestimated.The US Forest Service hasestimated the value of municipal water use at US$50 peracre-foot (Cdn$0.05 per cubic metre).101 Transferring thisaverage value, the economic value of water flow formunicipal use in the boreal region is at least Cdn$18.4million per year (2002$).

4.2.3.1.5 Soil Stabilization and Erosion Control

Forest vegetation helps stabilize soils, and therefore,reduces erosion and sedimentation.The costs associat-ed with erosion include reduced soil productivity,damaged roads and structures, filled ditches and reser-voirs, reduced water quality, and harm to fish popula-tions.The estimated values for soil stabilization anderosion control are revealed by the costs incurred dueto sedimentation. In the United States, cost estimates

due to sedimentation include US$1.94 per ton of sediment associated with logging-induced erosion and US$5.5 million annually in Oregon’s WillametteValley.102 Information on sedimentation or erosion ratesin the boreal region is not available, and therefore novalue/cost was applied to these items in this study.

4.2.3.1.6 Air Quality

Trees trap airborne particulate matter and ozone, andthereby improve air quality and human health. One US study shows that 500,000 mesquite trees (oncemature) remove 6,500 tons of particulate matter annu-ally, providing a value of US$4.16 per tree.103 Data ontree cover in and nearby urban areas of the borealregion were not available, and therefore no value wasapplied to this attribute in this study.

4.2.3.2 The Value of Biodiversity

4.2.3.2.1 The Value of Natural Pollination and Pest Control

Biological diversity is important in terms of its role asa storehouse of genetic material. Such information isused to breed plants and animals, to develop naturalpest and disease control, and for valuable pharmaceuti-cal products. Few studies have addressed the value ofbiological diversity in forest ecosystems. However, theestimated cost to US agriculture for the replacement of natural pest control services from all natural ecosystems by chemical pesticides is estimated at

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US$54 billion annually.104 Likewise, the pollinationservices of natural ecosystems may provide benefitsworth between US$4 billion and US$7 billion annual-ly for the US agricultural sector.105

The US Forest Service has estimated that it would costmore than US$7 per acre (Cdn$21.84 per hectare)to replace the pest control services of birds in forestswith chemical pesticides or genetic engineering.Similarly, it has been estimated that birds such as theevening grosbeak predation on western spruce bud-worm resulted in US$1,820 of positive economic benefit per year per square kilometre (US$182,000per hectare per year).106 If the former value of birds for pest control is applied per hectare of boreal forestland, then boreal birds provide a service worth $5.4 billion per year (2002$).

4.2.3.2.2 The Value of Non-Timber Forest Products

Biological diversity is also important for non-timbercommercial forest products and subsistence foods andmaterials. Forests produce many commercially valuableproducts other than timber. Examples of non-timberforest products include: maple products, berries,mushrooms, peat, floral greens, medicinal plants, edi-ble plants (e.g., wild rice), and wildlife species that can be used for food or medicinal, ornamental, orindustrial purposes.These products contribute signifi-cant value to the economy. For example, the totalmarket value of harvested non-timber products fromnational forests in the US Pacific Northwest was aboutUS$300 million in 1992.107

In Canada, the value of non-timber forest products wasroughly estimated at $241 million per year in 1997.108

In addition, the value of wild rice is approximately$2 million per year (2001$).109 In total, the economicvalue is an estimated $243 million per year. According

to researchers at the Canadian Forest Service (CFS),the current estimated economic output of forest-basedfoods ranges from $725 million to $1.33 billion, andthe future economic potential is between $2 and $7.4billion per year.110 For example, edible mushroomscould contribute as much as $115 million to theCanadian economy.

We roughly estimated that the value of non-timberforest products for the boreal region is at least $79million per year (2002$), based on an estimated 60percent of the more conservative (1997) national esti-mate for mushrooms, berries, and wild rice harvests(this figure excludes maple products).111 Sixty percentwas used to estimate the proportion of the nationalNTFP (non-timber forest products) economic value forthe boreal region based on the approximate propor-tion of timber value from the boreal region in section4.2.1 Market Values of Boreal Natural Capital of our report.

4.2.3.3 The Value of the Boreal Region to Aboriginal Peoples and Subsistence Living

Forests are also sources of subsistence foods, especiallyin the North. Canada’s boreal region is home to over 4 million Canadians, including 634 Aboriginal com-munities with over 200,000 people.112 Over the mil-lennia, Aboriginal peoples have developed valuable tra-ditional knowledge that has balanced conservationwith sustenance in the boreal region.The Boreal Shieldecozone alone is home to the majority of Aboriginalcommunities in Canada, with a full 80 percent of theAboriginal population in Canada living in this eco-zone.113 Some Aboriginal communities that inhabit thefrontier boreal forest of northern Canada still practisetheir traditional way of life and depend upon theforests for their food, medicines, and economic livelihood.

104 Moskowitz and Talberth, The Economic Case Against Logging our National Forests.105 Ibid.106 J.Y.Takekawa and E. O. Garton. 1984. “How Much Is an Evening Grosbeak Worth?” Journal of Forestry 82 (1984): pp. 426-428.107 Moskowitz and Talberth, The Economic Case Against Logging our National Forests.108 Ontario Forest Research Institute, Ministry of Natural Resources. Non-Timber Forest Products in Ontario: an Overview, Forest Research Information Paper No. 145. (Sault Ste.

Marie, ON: Ontario Forest Research Institute, Ministry of Natural Resources, 1999), p.3; reported by Saskatchewan Environmental Society. (Non-Timber ForestProducts: Economic Development while Sustaining our Northern Forests, http://www.environmentalsociety.ca/issues/forests/ntfp.pdf)

109 P. M. Catling and E. Small. “North American Wild Rice (Zizania Species)—A Wild Epicurean Crop,” Biodiversity 2, no. 3 (2001): pp. 24-25, http://www.tc-biodiversi-ty.org/sample-wildrice.pdf.

110 Canadian Forest Service. The State of Canada's Forests 2004-2005:The Boreal Forest (Ottawa: Natural Resources Canada, 2005), http://www.nrcan-rncan.gc.ca/cfs-scf/national/what-quoi/sof/latest_e.html.

111 This estimate was based on 60 percent of the total value. Sixty percent was used as an estimate based on the proportion estimated in the preceding section of thisstudy for the boreal region's forestry GDP as there was no proportion specified for the boreal region.

112 Analysis by Global Forest Watch Canada, 2003, based on Statistics Canada's 1996 Aboriginal Population Census.The communities for which data was gathered andanalyzed for the GFWC report are found in “Aboriginal Communities in Forest Regions in Canada: Disparities in Socio-Economic Conditions.”

113 Retrieved August 10, 2005 from Boreal Forest Network website http://www.borealnet.org.


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There is inadequate information availableregarding food use by native communi-ties in forest regions. However, a recentreport on Alberta’s boreal region statesthat subsistence values range from$5,000 to $11,000 per household,depending on the location and the vari-ety of activities studied.114 According to the 1996 Census, the Aboriginalpopulation in Canada’s boreal region is 201,704, and the number of house-holds is 51,166. If we apply the subsis-tence values from the Alberta report,then the subsistence value for Aboriginalpeoples in Canada’s boreal region isestimated between $261.4 million(2002$) and $575.1 million (2002$).

4.2.3.4 Passive Values:Conservation of Biodiversity

Forests hold cultural values, or whateconomists call passive use values, whichinclude endangered species habitat,the aesthetic value of forest scenery, andvalues associated with a region’s culturalheritage. For example, the valuesattached to the Pacific Northwest old-growth forests for northern-spotted owlhabitat range from US$35 to US$95 per household per year.115 Passive valuesalso include the value of knowing thatforests exist now and in the future. Forexample, the willingness to pay (WTP)to protect old-growth forests west ofthe Cascade Mountains is US$48 toUS$144 per household per year; it isUS$14 to US$92 per household peryear to protect wilderness in the RockyMountain region.116

The protection of biodiversity includesmaintaining effective habitat. Althoughit is difficult to value biodiversity, anAlberta study examined the WTP forhabitat conservation by Saskatchewanhouseholds.117 The study found thatSaskatchewans were willing to pay anaverage of $14.66 per household peryear for caribou conservation, based on an open-ended WTP question, com-pared with a mean WTP of $97.99 perhousehold, based on a discrete choicequestionnaire.118 Similarly, an Edmontonhousehold survey by Haener andAdamowicz found the median WTP forEdmonton households for old-growthforest protection was between $89 and$122 per year (1998$).119 We extrapo-lated the low-end WTP from theSaskatchewan study ($16.81 per house-hold per year; 2002$) to estimate apassive value for the boreal region.Assuming that 50 percent of borealhouseholds would be willing to pay thesame amount per year for the conserva-tion of biodiversity, then the passivevalue would be $12 million per yearfor habitat conservation (2002$).120

4.2.3.5 The Value of Boreal Wetland Ecosystem Services

The National Wetlands Working Groupdefines wetlands as “areas saturatedwith water long enough to promotewetland or aquatic processes as indicat-ed by poorly drained soils, hydrophyticvegetation and various types of biologi-cal activity that are adapted to a wet


Aboriginal People andBoreal Values

Nat

asha

Moi

ne

114 Haener and Adamowicz, “Regional Forest Resource Accounting”—based on replacement values obtained by inputtingprices using the closest substitutes to harvest products that are available in the nearest market.

115 Kreiger, The Economic Value of Forest Ecosystem Services.116 Ibid.117 M.Tanguay, W. L. Adamowicz, P. Boxall, W. Phillips, and W. White. A Socio-economic Evaluation of Woodland Caribou in Northwestern

Saskatchewan (Edmonton: University of Alberta, Department of Rural Economy, 1993), Project Rep. No. 93-04.118 Ibid.119 Haener and Adamowicz, “Regional Forest Resource Accounting.”120 Boreal human population is 3,611,498 (Statistics Canada. 2000. Human Activity and the Environment. Division.

System of Natural Accounts. Catalogue no. 11-509-XPE); estimated number of households in the boreal region is1,389,038 (based on the Canadian average of 2.6 people/household;http://www.statcan.ca/english/Pgdb/famil53_96a.htm . Passive value is the low-end willingness to pay (WTP) valuefor the conservation of caribou from a Saskatchewan study in 2002$ see Tanguay et al., A Socio-economic Evaluation ofWoodland Caribou.

Canada’s Boreal is the cultural,spiritual and economic base forapproximately 600 Aboriginalcommunities. Virtually the entireregion is subject to historic treatiesor modern day land claims byAboriginal peoples to theirtraditional territories.

Over the millennia, Aboriginal peoples have developed valuabletraditional knowledge that has balanced conservation with sustenance in the boreal region.

There is a growing respect for theexpertise and understanding thatAboriginal people have acquiredover countless generations throughobservation and experience on the land.



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121 C.Tarnocai. Wetlands of Canada (Ottawa: Eastern Cereal and Oilseed Research Centre. Research Branch, Agriculture and Agri-Food Canada, 2001). Although peat-lands functionally include all bog and fens, fens that have less than 40 cm peat depth are classified as mineral wetlands by Tarnocai (2001) for the purpose of cal-culating carbon.

122 Ibid.123 R.T. Woodward and Y. Wui. “The Economic Value of Wetland Services: A Meta-analysis.” Ecological Economics 37 (2001): pp. 257-270.124 N. Olewiler. The Value of Natural Capital in Settled Areas of Canada (Stonewall, MB, and Toronto: Ducks Unlimited Canada and the Nature Conservancy of Canada, 2004);

wetland plants can remove between 116 and 400 kilograms/hectare/year of phosphorus and 350 to 1,700 kilograms/hectare/year of nitrogen (i.e., duckweed);other plants can remove or degrade toxic compounds such as heavy metals and pesticides.

125 L. Ross. “Canada's Good Fortune: Putting a Price Tag on the Country's Wetlands,” Conservator, Winter 2003: pp. 35-37 (Ducks Unlimited Canada).

environment.”121 Wetlands cover approximately 14 per-cent of the Canadian landscape, with 90 percent ofthese wetlands being peatlands.122 Such areas were onceviewed as wastelands that needed to be drained forother land use.Today, there is widespread recognitionof their valuable ecosystem services, however muchdebate remains over the highest economic use forwetland areas and the extent to which resources shouldbe allocated for their protection and restoration.123

Wetlands are an integral component of the borealregion.The vast majority of boreal wetlands are peat-lands. Wetlands are an excellent example of the typesof goods and services that natural capital provides forsociety. Wetlands provide several ecosystem servicesincluding flood protection, water storage, water purifi-cation, carbon storage, food production, habitat forwildlife, and recreation. Wetlands are not isolatedecosystems.They are connected with the surroundingland and water, forming critical parts of our forests,watersheds, and coastal areas.

Wetlands at the headwaters of our river and streamsystems are the source of our freshwater, and thereforeaffect the health and productivity of downstreamhuman and freshwater communities. For example,they improve water quality by filtering and absorbingcontaminants. They can reduce the nitrate and phos-phorus that would flow into rivers and lakes by up to80 percent and 94 percent, respectively.124 This is animportant service if one considers that up to half ofthe fertilizer nitrogen is lost in runoff after most appli-cations.125 This is also an important service becauseexcessive nutrients reduce the availability of oxygen inwater, which can kill fish (i.e., through eutrophicationor excessive algae production). Such conditions alsogreatly reduce or eliminate opportunities for recre-ational use, and high nitrates make water unsafe todrink. Scientific studies also report that Canadian wet-lands can retain or remove up to 70 percent of thesediments, 90 percent of the bacteria, and almost allthe pesticides that enter them.

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Wetlands maintain our water supply and regulatewater flow. Small wetlands recharge water supplies toaboveground waterbodies (such as rivers, lakes, andstreams) and to groundwater.They control floods bystoring large amounts of water. For example, one-halfhectare of wetlands can store over 6,000 cubic metresof floodwater.126 If a wetland is lost due to land-usechanges, then the risk of floods and floodwater dam-age increases significantly.

Furthermore, wetlands, and peatlands in particular,provide sinks for atmospheric carbon dioxide (CO2).They, therefore, play an important role in the globalcarbon cycle. Wetlands may store as much as 40 per-cent of global terrestrial carbon, with peatlands andforested wetlands being the most significant carbonsinks. For example, although peatlands cover only 3percent of the world’s land area, they are estimated to store over 25 percent of the soil carbon pool.127

Wetlands are widely used for recreational activities.Wildlife viewing/photography is one of the fastestgrowing recreational activities in Canada, and is a majoractivity in and around wetlands. Across North America,60 million people watch migratory birds, and 3.2 mil-lion hunt ducks and geese annually, which generatesUS$20 billion each year in economic activity.Wetlandsare popular destinations because they provide habitat fora wide variety of wildlife; in North America, wetlandsare habitat for about 600 species. According to theRamsar Secretariat, which manages the Ramsar

Convention on Wetlands, freshwater fishing is entirelydependent on wetlands, and in the United States it hasbeen estimated that half of the seawater catch is alsoassociated with wetlands.This relationship is key to the45 million Americans that take part in recreational fish-ing, spending a total of US$24 billion each year.

Wetlands provide many commercial products such asfish, shellfish, blueberries, cranberries, timber, wildrice, and medicines. And, wetlands are particularlyimportant for commercial fisheries because theydepend on wetlands for spawning and nurseries,and for the food for growing stocks.

Several classes of wetlands are found in the borealregion. These include bogs, fens, marshes, swamps,and shallow open water.128 However there are twomajor types of wetlands: (1) mineral wetlands, whichcontain less than 40 centimetres of peat; and (2)organic wetlands, known as peatlands, which containmore than 40 centimetres of peat (organic material).129

4.2.3.5.1 Mineral Wetland (Non-Peatland) Ecosystem Service Values

According to a 2001 wetland inventory, Canada’s borealnon-peatland wetlands (or mineral wetlands) cover 2.8million hectares (see Table 19)130 of the total 86.0 millionhectares of wetlands across the region (also see section4.2.3.5.2 Peatland (Organic Wetlands) Ecosystem Service Values).The boreal region has the largest area of wetlands


126 Olewiler, The Value of Natural Capital in Settled Areas of Canada; and Ross, “Canada's Good Fortune.”127 Ramsar Convention Bureau. Background Papers on Wetland Values and Functions: Climate Change Mitigation (Gland, Switzerland, 2000), http://www.ramsar.org/info/values_climate_e.htm.128 For definitions, please see C.Tarnocai. Wetlands of Canada (Ottawa: Eastern Cereal and Oilseed Research Centre, Research Branch, Agriculture and Agri-Food Canada, 2001).129 Ibid.130 Ibid.

Source: C.Tarnocai. Wetlands of Canada (Ottawa: Eastern Cereal and Oilseed Research Centre. Research Branch, Agriculture and Agri-Food Canada, 2001).

a Only fens that have < 40 cm peat depth are included in Table 19; fens with > 40 cm peat depth are included in Table 22.

Table 19: Area of Mineral Wetlands (Non-Peatland) in Canada’s Boreal Region by Class of Wetland

Ecoclimatic Region Mineral Wetlands (Non-Peatland Wetlands)(square Kilometres)

Fensa Marshes Swamps Shallow Open Water Total

Boreal 340 16,277 497 4,875 21,989

Subarctic Low 1,246 0 2 4,618 5,866

Subarctic Cordilleran 452 0 0 61 513

Total area (square kilometres) 2,038 16,277 499 9,554 28,368

Total area (hectares) 203,800 1,627,700 49,900 955,400 2,836,800



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and the highest proportion of wetlands (57 percent)when compared with the other ecoclimatic regions of Canada.

Placing a value on wetland ecosystem services is achallenge due to the nature of the services themselves.Wetland ecosystem services typically do not have a market value and, therefore, they must be accounted for using non-market valuation techniques. Reviews ofwetland valuation studies document many wetland valu-ation studies over the last three decades.131 According toone review, wetland values range greatly-from US$0.06per acre to US$22,050 per acre.132 Another study tookthe values from 42 studies to develop average ecosystemservice values including 13 freshwater wetland sources.The average values for freshwater wetlands ranged fromUS$7,684 to US$31,772 per acre.133 A recent Canadianstudy for settled areas reported annual values rangingfrom Cdn$5,792 to Cdn$24,330 per hectare of wet-land.134 However, not all boreal wetlands provide all theservices evaluated for wetlands in the above studies.Thevalues determined include ecosystem services such as

fish, shellfish, waterfowl, mammal and reptile habitat;water supply; erosion, wind, and wave barrier; stormand flood control; and recreational opportunities.

One of the factors causing such a wide range of valuesfor wetlands is the difference in types of wetlands andtheir defining characteristics. In other words, differenttypes of wetlands provide different types of services.For example, coastal wetlands provide shellfish for har-vesting and coastal protection from erosion and risingsea levels; peatlands provide market revenues due topeat harvesting, and non-market values for carbonstorage; and headwater wetlands provide water treat-ment services and protection from flooding. Second,studies tend to be determined by the major service(s)provided according to the dominant nearby humanland use. For instance, if nearby human activities areprimarily agricultural, then values may focus on theremoval of excessive nutrients and other contaminantsfrom the water supply.Third, studies vary in the num-ber of values included in their research. Furthermore,some valuation techniques focus on total economic

Source: K. Schuyt and L. Brander. Living Waters:The Economic Values of the World’s Wetlands (Gland, Switzerland: World Wildlife Fund, 2004).

131 R. E. Heimlich, K.D. Weibe, R. Claassen, D. Gadsy, and R.M. House. Wetlands and Agriculture: Private Interests and Public Benefits (Washington, DC: Resources Economics Division. E.R.S.USDA, 1998), Agricultural Economic Report 765.10

132 The most well-known study by Costanza et al. (in 1997) on the value of the world's ecosystems determined a general annual value for wetland services at US$14,785 perhectare. See Robert Costanza, Ralph d'Arge, Rudolf de Groot, Stephen Farber, Monica Grasso, Bruce Hannon, Karin Limburg, Shahid Naeem, Robert V. O'Neill, Jose Paruelo,Robert G. Raskin, Paul Sutton, and Marjan van den Belt. “The Value of the World's Ecosystem Services and Natural Capital,” Nature 38, no. 15 (1997): pp. 253-259.

133 K. Breunig. Losing Ground:At What Cost?: Changes in Land Use and Their Impact on Habitat, Biodiversity, and Ecosystem Services in Massachusetts.Technical Notes, 3rd ed. of the Losing Ground Series(Lincoln, MA: Mass Audubon, 2003) (standardized to US 2001 dollars), http://www.massaudubon.org/losingground; ecosystem services included in the valuation are distur-bance prevention, freshwater regulation and supply, waste assimilation, aesthetic/amenity, and soil retention.Valuation studies that were selected were (a) peer reviewed andpublished in recognized journals; (b) focused on temperate regions in North America or Europe; and (c) focused primarily on non-consumptive use.

134 Olewiler, The Value of Natural Capital in Settled Areas of Canada; dollar amounts were adjusted by author for inflation, assuming an inflation rate of 2% per year since the mid-1990s, andconverted to Canadian dollars using a Canadian-US exchange rate of 1.35.

Table 20: Average Wetland Ecosystem Service Values from Wetland Valuation Meta-Analysis

Wetland Function US$/hectare/year (2000$) Cdn$/hectare/year (2002$)

Flood control 464 571.02

Recreational fishing 374 460.27

Amenity/recreation 492 605.48

Water filtering 288 354.43

Biodiversity 214 263.36

Habitat nursery 201 247.36

Recreational hunting 123 151.37

Water supply 45 55.38

Materials 45 55.38

Fuel wood 14 17.23

Total 2260 2,781.28�


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value by adding up a set of relevant values, and someonly on one particular value. Fourth, studies vary bythe valuation method and economic theory underlyingthe valuation used. Contingent valuation determines acommunity’s willingness to pay, whereas replacementcost valuation estimates an alternative way of obtaininga service such as the cost of chemical or mechanicalsubstitutes. Finally, some studies report direct total rev-enues (e.g., market value of products extracted), whileother studies estimate the economic surplus or themarginal value of services according to standard eco-nomic theory.135

Site-specific valuation studies would be the bestmethod to value Canada’s boreal wetlands. However,such studies have not yet been conducted in thisregion.Therefore, estimates must be made using bene-fits transfer, i.e., prediction of value based on previousstudies. In order to estimate wetland values for theregion, we chose to extrapolate average wetland valuesby wetland function from a meta-analysis of 89 wet-land valuation studies.136 We chose this meta-analysisbecause of the great range of estimates for the ecosys-tem service values of wetlands, as outlined above.Given the extensive review taken by the meta-analysis,it is the most comprehensive to date. In addition, theaverage values provide estimates for the cost of replac-ing wetland functions globally (see Table 20).

Values for the following services provided by wetlandswere chosen as most applicable to the boreal region

because they are generally universal benefits from wet-lands: flood control, water filtering, and biodiversity.For example, the boreal region has the largest area ofwetlands of any ecosystem in the world, and therefore,is also breeding ground for 12 to 14 million waterfowland untold millions of shorebirds.137 Results from themeta-analysis provide average wetland values as fol-lows: $571.02 per hectare per year for flood control;$354.43 per hectare per year for water filtering;and $263.36 per hectare per year for biodiversity(2002$Cdn; see Table 20). Using these values, Cana-da’s boreal mineral wetlands (excludes peatlands) contribute services worth Cdn$3.4 billion dollars per year (2002$; see Table 21).

4.2.3.5.2 Peatland (Organic Wetlands) Ecosystem Service Values

In the Canadian boreal region, there are 83.2 millionhectares of peatlands according to the results from ourspatial analysis of Canada’s Peatland Database.138 Figure4 illustrates the distribution of peatlands in the borealregion. Peatlands provide an invaluable service by stor-ing large amounts of carbon. In order to estimate thecarbon stored in the boreal region’s peatlands, we usedthe average carbon density for peatlands by ecozone(i.e., Boreal East, Boreal West, and Taiga) reported by a University of Saskatchewan report that analyzed thevalue of carbon in the protected areas of Canada. As a result, we estimated that boreal peatlands hold 19.5billion tonnes of carbon (see Table 22).139


Source: Based on average wetland function values from K. Schuyt and L. Brander. Living Waters:The Economic Values of the World’s Wetlands (Gland,Switzerland: World Wildlife Fund, 2004).

135 Woodward and Wui, “The Economic Value of Wetland Services.”136 K. Schuyt and L. Brander. Living Waters:The Economic Values of the World's Wetlands (Gland, Switzerland: World Wildlife Fund, 2004).137 Canadian Forest Service. The State of Canada's Forests 2004-2005.138 Peter Lee, Global Forest Watch Canada analysis, sent March 1, 2005. Peatland area data for the Boreal and Taiga ecozones were extracted using spatial analysis of geo-coded data

from Canada's Peatland Database.139 Kulshreshtha et al. Carbon Sequestration in Protected Areas of Canada.

Table 21: Canada’s Boreal Mineral Wetland Ecosystem Service Values

Wetland Function Values

millions (2000$) millions (2002$) $/hectare/year (2002$)

Flood control 1,585 1,620 571.02

Water filtering 984 1,005 354.43

Biodiversity 731 747 263.36

TOTAL 3,300 3,372 1,188.81



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Source: Peatland area: Analysis by Global Forest Watch Canada, March 1, 2005.

Source: Global Forest Watch Canada, 2005

Figure 4: Area of Peatlands in Canada’s Boreal Region

Table 22: Canada’s Boreal Wetlands by Ecozone-Area and Carbon Contentof Peatlands

Ecozone Peatland Area Carbon Content

(squarekilometres) (hectares) (millions of tonnes)

Boreal Cordillera 1,775 177,500 83.8

Boreal Plains 98,161 9,816,100 2,559.1

Boreal Shield 245,154 24,515,400 6,391.2

Hudson Plains 248,686 24,868,600 6,483.2

Taiga Cordillera 67 6,700 1.1

Taiga Plains 141,100 14,110,000 2,371.9

Taiga Shield 97,054 9,705,400 1,631.5

TOTAL 831,998 83,199,800 19,521.7


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A median value ($17.50 per tonne of carbon) basedon the replacement cost method (i.e., afforestation onmarginal agricultural land), was used to evaluate boreal forest carbon in a preceding section (see section4.2.3.1.2 The Value of Climate Regulation: Carbon Storage). Theannual net carbon sequestered by boreal peatlands isan estimated 21.4 million tonnes. This estimate isbased on Canada’s carbon budget, which reports thatan annual net 257,485 tonnes of carbon is sequesteredper hectare by peatlands.140 Thus, we estimate theannual value at $383 million using the above replace-ment cost ($17.50 per tonne of carbon).

If we apply the same replacement value, the value ofpeatland carbon storage in Canada’s boreal region isan estimated $349 billion ($4,195 per hectare). Thisvalue reflects the carbon stored or stock value (asopposed to the annual net carbon sequestered), andtherefore, is not included in the total sum of ecosys-tem services. Similarly, we applied the trading price of carbon and an estimated value of the risks of cli-mate change damage costs for forest carbon valuation.Based on the European Union’s carbon emissions trad-ing price, ($7.48 per tonne of carbon),141 the borealpeatland carbon stores are worth $137 billion ($1,648per hectare). If the value of the carbon stored in borealpeatlands is based on the cost of replacement throughafforestation, the value is $349 billion ($4,195 perhectare).The value of peatland carbon storage based onthe cost of climate change damages as forecast by theglobal reinsurance sector as a proxy142 is significantlyhigher: an estimated $1,093 billion per year ($13,137per hectare per year).

Peatlands are also valuable for their water regulation andwater filtering services. Based on the average wetlandvalues reported above in Table 20, flood control servicesare an estimated $46.5 million per year, and water fil-

tering services are an estimated $28.9 million per year(2000$); a total of $77 million per year (2002$).

The representative values for Canada’s boreal wetlandsare large, yet incomplete. Due to a lack of information,monitoring, and knowledge, we do not know the fullextent of their ecosystem services. Nor is it possible tofully value their services, given the fact that the totalvalue of the world’s ecosystems is infinite—for with-out them, we could not live. However, estimates of thevalues we can determine are useful for land-use plan-ning and policy decision-making. In making decisionsat the local level or management unit level, it is usefulto consider the value of carbon storage per hectare ofpeatland. Given the values used above, the value ofcarbon storage by peatlands is estimated to be worthfrom $1,648 to $13,137 per hectare.

Although we do not have the information to determinehow much of Canada’s boreal wetlands have been lostdue to human activities, it is important to considerCanada’s wetlands in a global context. In all, 35 per-cent of the world’s wetlands are in Canada’s borealregion, and this figure includes over 40 percent ofCanada’s Wetlands of International Importance.143

According to the Organisation for Economic Co-opera-tion and Development, some estimates indicate that theworld may have already lost 50 percent of its wetlandssince 1900-much of which has occurred in northerncountries.144 In Canada, the National Wetlands WorkingGroup reported that an estimated 65 percent of Atlantictidal and salt marshes, 70 percent of the lower GreatLakes-St Lawrence River shoreline marshes and swamps,up to 71 percent of prairie potholes and sloughs, and80 percent of Pacific coast estuarine wetlands havebeen converted to other uses-primarily agriculturaldrainage; diking; urban and industrial expansion; con-struction of ports, roads, and hydroelectric facilities;


140 W. A. Kurz, M. J. Apps,T. M. Webb, and P. J. McNamee. The Carbon Budget of the Canadian Forest Sector: Phase I Ottawa: Forestry Canada, 1992). Note: accounts for methanerelease.

141 European Union Price Assessment for carbon emissions trading, April 4, 2005, http://www.pointcarbon.com (global provider of independent analysis, news, mar-ket intelligence, and forecasting for emerging carbon emission markets).

142 The global cost estimate is reported by United Nations Environment Programme. “Impact of Climate Change to Cost the World $US 300 Billion a Year,” newsrelease, February 3, 2001, http://www.unep.org/Documents/Default.Print.asp?DocumentID=192&ArticleID=2758;The value per tonne of carbon is estimatedbased on the total annual cost, $304.2 billion and the total 2000 global carbon emissions due to fossil fuel use: 6.611 billion tonnes; see Marland et al., “Global,Regional and National CO2 Emissions.”

143 Designated by the Ramsar Convention on Wetlands, http://www.ramsar.org.144 OECD/IUCN. 1996. Guidelines for Aid Agencies for Improved Conservation and Sustainable Use of Tropical and Sub-tropical Wetlands (Paris, France: OECD, 1996).

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and recreational property development.145 The groupalso reports that boreal wetlands have been affectedprimarily by conversion to hydroelectric powerreservoirs and corridors, peat extraction for agricultureand energy, and forestry harvesting.

4.2.3.5.3 Total Boreal Wetland Ecosystem Service Values—Summary

The total boreal wetland ecosystem service values are$349 billion for carbon storage plus $80.4 billion per year in other services.The total value per hectare is $4,195 for peatland carbon storage plus $2,119 per year for all wetland areas (see Table 23).

4.2.3.6 The Value of Nature—Based Recreation in Canada’s Boreal Region

Recreation and tourism are two of the fastest growingeconomic sectors. In the United States, the ForestService has valued recreational activities in nationalforests as contributing $110 billion annually to the

GDP.146 In addition, studies have shown that wild, road-less lands in the United States offer unique recreationalopportunities, and based on an average value of$41.87 per visitor day, the economic value of recre-ation on the 42 million acres of roadless areas in USnational forests totals $600 million annually.147

In Canada, the most current information available onnature-related activities is Environment Canada’s 1996Survey on the Importance of Nature to Canadians. This surveyincludes outdoor activities in natural areas, wildlifeviewing, recreational fishing, hunting, residentialwildlife-related activities, and indirect nature-relatedactivities. According to the 1996 survey, 20 millionCanadian residents took part in nature-related activitiesin Canada in 1996.148 The survey also found thatCanadians took a total of 160 million nature-relatedtrips in 1996. In all, 47.4 million (30 percent) ofthese trips were within or to the boreal region, withthe greatest number of trips taken to the Boreal Shieldand Boreal Plains ecozones. In total, participants inthe survey reported spending 1.6 billion days onnature-related activities in 1996; 193 million daysalone were spent on nature-related activities in the

Source: See above sections for sources used to estimate values for peatlands and non-peatland wetland values.

145 National Wetland Working Group (NWWG). Wetlands of Canada. Ecological Land Classification Series, No. 24. (Ottawa and Montreal: Sustainable DevelopmentBranch, Environment Canada, and Polyscience Publications, 1988).

146 Kreiger, The Economic of Forest Ecosystem Services.147 Ibid.148 E. Duwors, M.Villeneuve, F. L. Filion, D. Burke, M. Hamel, and J. Coull. The Importance of Nature to Canadians:A Statistical Compendium for Ecozones and Ecozones within Province or

Territory in 1996, Special Report #15 (Ottawa: Environmental Economics Branch, Economic and Regulatory Affairs Directorate, Environment Canada, 1999).

Table 23: Summary of Canada’s Boreal Wetland Ecosystem Service Values (Current Estimated Value of Conserving Natural Capital in Canada’s Boreal Region)

Type of Good or Service Total Area Total Value Value per Hectare(hectares) (billions, 2002$) (2002$)

Non-peatland wetland ecosystem 2,836,800 3.4/year 1,189/yearvalues (flood control, water filtering,and biodiversity)

Peatland carbon storage value 83,199,800 349.1 4,196

Peatland carbon sequestration value 83,199,800 0.4/year 4.6/year

Peatland flood control and water 83,199,800 77.0/year 926/yearfiltering services

Total 86,036,600 349.1 for 4,196 for peatland(total wetland area) peatland carbon storage plus

carbon storage 2,119/year inplus 80.6/year in annual benefits

annual benefits


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Boreal Shield ecozone, with an overalltotal of 245 million days spent inBoreal ecozones.

The 1996 survey also addressed expen-ditures on nature-related activities andtheir economic impacts. According tothe survey, 20 million Canadians spent$11.0 billion in Canada during the yearto pursue nature-related activities.149

These expenditures included $1.3 bil-lion for wildlife viewing, $1.9 billionfor recreational fishing, over $800 mil-lion for hunting, and $1.2 billion forother nature-related activities such ascontributions to nature-related organi-zations, sustaining land for conserva-tion, and residential wildlife-relatedactivities.150 Canadians spent over $7.2 billion of the total expenditureson outdoor activities in natural areas in Canada, with the average participantspending $704 over the year or $44per day of participation. In addition,US visitors spent over $700 million onwildlife viewing and recreational fish-ing in Canada.151

Nature-related activities also have animpact on national, provincial, and territorial economies. According tothe same survey, the $11.7 billion (i.e.,Canadian plus US visitor expenditureson nature-related activities; $12.8 bil-lion in 2002$) spent on such activitiesgenerated $17.3 billion ($18.9 billionin 2002$) to gross business productionand $12.1 billion ($13.2 billion in2002$) to Canada’s GDP.These expen-ditures also led to contributions of $5.9billion ($6.4 billion in 2002$) in per-sonal income, 215,000 jobs, and $5.4billion ($5.9 billion in 2002$) in gov-ernment revenue from taxes.152

Based on the survey’s results, approxi-mately 30 percent of total participants

undertook trips in the boreal region(6.1 million), and 30 percent of totaltrips were undertaken in the borealregion.Therefore, we estimate that $3.8billion (2002$) of the total expendi-tures would have been spent on nature-related activities in the boreal region.Using the dollar generated per dollarspent from the survey’s input/outputmodel results, the impact of the borealregion expenditures would have the following estimated economic impacton Canada’s economy: $5.7 billion ongross business production, $4.0 billionon GDP, $1.8 billion in governmentrevenue from taxes, and $1.9 billion in personal income generated by64,500 sustained jobs (2002$).

The above expenditures reflect theactual spending by Canadians on nature-related activities in the boreal region. Inaddition, participants were asked toreport the amount by which their costswould have had to increase in order tonot participate in these activities.Thisquestion was asked to estimate theeconomic value or marginal value ofnature-related activities in Canada.Thesurvey revealed that Canadians placed asignificant economic value on suchactivities and, in 1996, were willing topay an additional $2 billion ($2.2 bil-lion in 2002$) for nature-related activi-ties. Based on 30.2 percent of partici-pants reporting the boreal region astheir destination, we estimate that themarginal value of nature-related activi-ties in the boreal region is $654.7million per year (2002$).

Therefore, a total of $4.5 billion peryear (2002$) is the estimated value of nature-related activities in the boreal region.


The Value of Nature-based Recreation

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149 Survey included 10 provinces and the Yukon. It excluded the Northwest Territories due to its vast size and sparse pop-ulation, which made it prohibitively expensive to reach its population for survey.

150 Environment Canada. The Importance of Nature to Canadians:The Economic Significance of Nature-Related Activities (Ottawa: Ministerof Public Works and Government Services Canada, 2000).

151 The total spent by US visitors would be higher if it included spending for other nature-related activities such ascamping, sightseeing, boating, and hiking.

152 Environment Canada. 2000. The Importance of Nature to Canadians.

Recreation and tourism are two

of the fastest growing economic

sectors.

In the United States, the forest

service has valued recreational

activities in national forests as

contributing $110 billion annually

to the GDP.

In Canada, according to Environment

Canada’s “Survey on the Importance

of Nature to Canadians”, 20 million

Canadians spent $11.0 billion in

Canada during 1996 on nature-

related activities.



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conclusions

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5.

The primary purpose of our two-year study is tobegin to identify, inventory, and measure the

full economic value of the many ecological goodsand services provided by Canada’s vast boreal region.For this purpose, we developed the Boreal EcosystemWealth Accounting System (BEWAS), a tool for meas-uring and reporting on the physical conditions and the full economic value of the boreal region’s naturalcapital and ecosystem services.

The study reveals the broad range of ecological goodsand services provided by Canada’s boreal region.Thesehave been organized into a BEWAS.The purpose of theBEWAS is to give Canadian decision makers a boreal natural capital “balance sheet” for assessing the sustain-ability, integrity, and full economic value of the borealregion.We have identified a number of functions ofecosystem services: atmospheric stabilization; climatestabilization; disturbance avoidance; water stabilization;water supply; erosion control and sediment retention;soil formation; nutrient cycling; waste treatment; polli-nation; biological control; habitat; raw materials; geneticresources; and recreation and cultural. As noted, most of these ecosystem services go unaccounted for in con-ventional economic decision making.

The second result of this study is that it begins to estimate some of the economic value of the borealregion’s many ecological goods and services using theBEWAS as an analytic and reporting framework.Thepurpose of such valuation work is to provide decisionmakers with a means of considering the full economicvalue of the many ecosystem services of the borealregion when making decisions about its future.

The results of the preliminary economic valuation esti-mates of the boreal region are summarized in Table 24.We have estimated the annual market values of natural

capital extraction and the non-market values of ecosys-tem services in the boreal region for the year 2002.The market values associated with the use of some ofthe boreal region’s natural capital resources (e.g., tim-ber, minerals, water) are calculated based on estimatesof the contribution their extraction makes to Canada’sGDP, adjusted for some of the regrettable environmentaland societal costs associated with natural resourceextraction.The estimated net market value of borealnatural capital extraction in 2002 is $37.8 billion.If accounted for, boreal natural capital extraction wouldequate to 4.2 percent of the value of Canada’s GDP in2002.The net market value calculation is based on thecontribution to Canada’s GDP from boreal timber har-vesting; mineral, oil, and gas extraction; and hydroelec-tric generation ($48.9 billion; or $83.63 per hectare of the boreal ecosystem land base) minus the estimated$11.1 billion in environmental costs (e.g., air pollu-tion costs) and societal costs (e.g., government subsi-dies) associated with these industrial activities.

We have also estimated the non-market values of asmall subset of boreal ecosystem services, includingthe economic value of carbon sequestration by forestsand peatlands, nature-related recreation, biodiversity,water supply, water regulation, pest control, non-tim-ber forest products, and Aboriginal subsistence values.The estimated total non-market value of borealecosystem services in 2002 is $93.2 billion (or$159.52 per hectare of the boreal ecosystem landbase). If accounted for, boreal ecosystem serviceswould equate to 8.1 percent of the value of Canada’sGDP in 2002.The ecosystem services with the highesteconomic value per year are (1) flood control andwater filtering by peatlands—$77 billion; (2) pestcontrol services by birds in the boreal forests—$5.4billion; (3) nature-related activities-$4.5 billion; (4)flood control, water filtering, and biodiversity value

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by non-peatland wetlands—$3.4 billion; and (5) netcarbon sequestration by the boreal forests-$1.85 billion.

When we compare the market and non-market valuesfor 2002, the total non-market value of borealecosystem services is 2.5 times greater than the netmarket value of boreal natural capital extraction.This result is significant. It suggests that the ecologicaland socio-economic benefits of boreal ecosystem serv-ices, in their current state, may be significantly greaterthan the market values derived from current industrialdevelopment-forestry, mining, and hydroelectric ener-gy—combined.

What does this mean? It affirms the relative impor-tance of ecosystem functions that have no markets inwhich their services are traded, and the potential costof replacement if human-made infrastructure canreplace their services. It is important to note that theestimates in this study do not reflect the total cost ofreplacement and that in most cases, it is not possibleto replace whole ecosystems. However, the estimates of ecosystem economic values provide a base value forimproved decision making. For example, in manycases, it is clear that it will be more costly to restoreecosystem functions than it is to conserve them.


Boreal Ecosystem Monetary Economic Values and Regrettable Costsa

Wealth Natural (2002$ per annum)b

Capital Accounts

Forests Market values:• $14.9 billion in estimated market value of forestry-related GDP in the boreal region (est. 2002)Costs:• $150 million in estimated cost of carbon emissions from forest industry activity in the boreal

region (deduction against forestry-related GDP)Non-market values:• $5.4 billion in value for pest control services by birds• $4.5 billion for nature-related activities• $1.85 billion for annual net carbon sequestration (excludes peatlands)• $575 million in subsistence value for Aboriginal peoples• $79 million in non-timber forest products• $18 million for watershed service (i.e., municipal water use)• $12 million for passive conservation value

Wetlands and peatlands Non-market values:• $77.0 billion for flood control and water filtering by peatlands only• $3.4 billion for flood control, water filtering, and biodiversity value by non-peatland wetlands• $383 million for estimated annual replacement cost value of peatlands sequestering carbon

Minerals and subsoil assets Market values:• $14.5 billion in GDP from mining, and oil and gas industrial activities in the boreal region

(est. 2002)Costs:• $541 million in federal government expenditures as estimated subsidies to oil and gas sector in

the boreal region• $474 million in government expenditures as estimated subsidies to mining sector in the

boreal region

Water resources Market values:• $19.5 billion in GDP for hydroelectric generation from dams and reservoirs in the Boreal Shield

ecozone (est. 2002)


~ p. 63 ~

Highlights of ResultsThe following are the key highlights of our study andanalysis.

The results of the estimated net market value of borealnatural capital extraction for 2002 include:

• Canada’s boreal forests contributed an estimated$14.9 billion to Canada’s GDP from harvested timber (based on estimates that 60 percent ofCanada’s forest industry activity occurs in theboreal region).

• Mining, and oil and gas industrial activities in theboreal region contributed an estimated $14.5 billion to Canada’s GDP.

• Hydroelectric generation from dams and reser-voirs in the Boreal Shield ecozone contributed an estimated $19.5 billion to Canada’s GDP.

• There is an estimated $11.1 billion in air pollutionand government subsidy costs associated withforestry and mining sector activities; costs thatshould, in principle, be deducted from the marketGDP value as environmental and social costs ofdevelopment.


Note: Market values are shown in blue; non-market values are shown in green; and environmental/societal costs are shown in red.

a These are either environmental or societal costs associated with market-based activities (e.g., forest industry operations).

b A GDP chained, implicit price index was used throughout the study to standardize to 2002 dollars.

c Based on European Union air pollution cost estimates for SO2, NOx, PM2.5, and VOC for 2002.


Boreal Ecosystem Monetary Economic Values and Regrettable Costsa

Wealth Natural (2002$ per annum)b

Capital Accounts

Waste production (emissions to Costs:air, land, and water) • $9.9 billion in estimated air pollution costs to human healthc

TOTAL market values (forestry, $48.9 billionmining, oil and gas industrial activity, and hydroelectric generation)

Less cost of pollution and subsidies:• Air pollution costs - $9.9 billion• Government subsidies to - $474 million

mining sector• Federal government subsidies - $541 million

to oil and gas sector• Forest sector carbon emission - $150 million

costs

NET market value of boreal $37.8 billionnatural capital extraction

TOTAL non-market value of $93.2 billionboreal ecosystem services

RATIO of non-market to 2.5market values



~ p. 64~

The results of the estimated total non-market value of boreal ecosystem services for 2002 include:

Forests• The annual non-market boreal forest ecosystem

service values are estimated at $12.4 billion, or$51.24 per hectare per year for 2002; this figureincludes an estimated $1.85 billion for the annualnet carbon sequestration by forests.

• Like a bank account, Canada’s boreal forests andpeatlands represent a massive storehouse of car-bon. An estimated 67 billion tonnes of carbon arestored in the boreal region—the equivalent of 303years of Canada’s total 2002 carbon emissions, or7.8 years of the world’s total carbon emissions inthe year 2000. How much is this stored carbonworth to the world? Munich Re, one of theworld’s largest reinsurance companies, has esti-mated that the cost to the global insurance indus-try of continued increases in global carbon emis-sions to the atmosphere could reach US$304 bil-lion per year by the end of the decade. Using thisestimate as a proxy for the value of maintainingcarbon storehouses like the boreal region wouldsuggest a value of carbon at US$46 per tonne ofcarbon (based on total global carbon emissions in the year 2000). Using Munich Re’s carbonvalue estimates would place the value of the current total carbon stored in Canada’s boreal“carbon bank account” at US$3.7 trillion.

Wetlands and Peatlands• The annual non-market boreal wetland and

peatland ecosystem service values (flood control,water filtering and biodiversity value) are estimat-ed at $80.4 billion ($934 per hectare of wetlandand peatland combined per year), plus $383 mil-lion per year for carbon sequestration by peat-lands. In terms of stock values, 83.2 millionhectares of peatland in Canada’s boreal regionhold an estimated 19.5 billion tonnes of carbonworth an estimated $349 billion (i.e., carbonstock value; $4,195 per hectare).

Nature-based Recreation • Approximately 6.1 million Canadians participate

in nature-related activities per year in Canada’s

boreal region worth an estimated $4.5 billion ($3.8billion in total nature-related-activity expendituresplus $654.7 million per year in economic value;included in annual forest ecosystem total value).

• Based on input/output modelling, the above bore-al region expenditures would have the followingeconomic impact on Canada’s economy: $5.7 bil-lion on gross business production, $4.0 billion onGDP, $1.8 billion in government taxes and rev-enue, and $1.9 billion in personal income gener-ated by 64,500 sustained jobs.

• While our account of the boreal region is prelimi-nary, it reveals the importance of measuring the fullrange of ecological and social values of ecosystemsto Canadians.The accounts also begin to show thatthe increasing pressures on boreal ecosystemintegrity from human and industrial developmentcould potentially threaten the future economicwell-being of Canadians and global citizens.

We consider our estimates to of ecosystem service val-ues to be both incomplete and conservative. Whileincomplete, they demonstrate the importance of con-serving the fullest possible range of ecosystem servicesfor the benefit of both Canadians and global citizensvis-à-vis the important market values derived fromnatural capital extraction. Indeed, the true value of theboreal region in its most integral state might be bestappreciated by those nations whose ecosystems havealready been irreparably degraded or destroyed.

The results of our study suggest that Canadians haveimportant issues to contemplate, namely:

• What level of development would be acceptable inorder to minimize further fragmentation, loss ofintact boreal ecosystems, and the degree of dam-age to ecosystem function?

• How much of the current intact boreal ecosystemsshould be protected from future development?

• What are the real economic costs and benefits toCanadians if industrial development of the borealregion is forgone?

• What is the true value of conserving the integrityand full functional capacity of the boreal region’secosystems for current and future generations ofCanadians and global citizens?


~ p. 65 ~

• Are other nations willing to pay Canada for pre-serving the boreal region’s ecological goods andservices?

• Should Canada adopt a more precautionary andconservative approach to decision making withrespect to the boreal region by ensuring ecosystemintegrity and optimum ecosystem service capacityare the primary objectives of future land-use plan-ning and development?

In order to answer these questions and make well-informed decisions, all levels of government (federal,provincial, and municipal), working with industry andlocal communities, need to make a commitment to:

• Develop a system of natural capital accounting,such as the BEWAS, to guide land-use planning,resource management, and economic developmentpolicies. This accounting system would include acomprehensive and nationally coordinated inven-tory of boreal natural capital;

• Incorporate accounts of natural capital and ecolog-ical goods and services in national and provincialincome accounts to guide economic, fiscal, andmonetary policies, and;

• Provide full cost accounting of social and environ-mental costs associated with natural capital devel-opment (through extraction) and total economicvaluation of natural capital and ecosystem services.

The primary shortcoming of our BEWAS estimates for 2002 is the lack of data on both natural capitalresources and the condition of ecosystem services and functions. In attempting to construct a preliminaryBEWAS, we conducted an exhaustive search of numer-ous government and other datasets on natural capitalrelated to the boreal region that could be used to“populate” our BEWAS framework with real currentand historical data. It became evident that there is asignificant deficit in basic natural resource inventoryinformation. For example, stock data on boreal naturalcapital assets such as forest inventory, minerals, petro-leum resources, water resources, fish and wildlife, andarable agricultural land are either not available orwanting. Moreover, flow data such as the volume and rate of timber harvesting, the impact on forests ofother land-use development (e.g., oil and gas develop-ment), and the impact of forest fires on boreal forests

are not available. Our attempts to develop a boreal carbon account (the amount of carbon stored andsequestered annually) based on Canada’s NationalForest Inventory (CanFI) were hampered by a lack of sufficient progress on, and utility of, Canada’semerging carbon budgeting model. Most importantly,there is simply no information on or measures of theintegrity of boreal ecosystems, and thus no capacityfor assessing the condition of ecosystem services. Inthe absence of hard, quantitative inventory data, wefaced a daunting challenge in constructing a meaning-ful set of economic value estimates for the borealregion’s natural capital and ecosystem services.

Our study’s results appear to be conservative. One ofthe first attempts to measure the value of ecosystemservices globally was undertaken by Robert Costanzaand a team of ecologists and economists in 1997.Costanza et al. estimated the total economic value(TEV) of the world’s ecosystem services.153 Based on a study of 17 ecosystem service valuation studies for 16 biomes, they estimated the non-market value ofEarth’s ecosystems between US$16 and US$54 trillionper year, or an average value of US$33 trillion per year.The authors suggested their estimates were conservativeif not a minimum value. Costanza et al. estimated totalecosystem service values for the temperate forest biome to be worth $467.08 per hectare per year(2002$Cdn).154 If we were to apply Costanza et al.’s per hectare ecosystem service value estimate to Canada’s entire boreal region (584 million hectares),then the estimated total value of Canada’s borealecosystem services would equate to $244.7 billion per year, or over two times our estimate of $93.2 bil-lion per year (i.e., $159.52 per hectare per year[2002$Cdn]).The discrepancy between our estimateand Costanza et al. estimates is likely due to the fact that their study attempted to measure a greater number of ecosystem services.

While the Costanza et al. study has remained provoca-tive, providing ecosystem service values that are com-monly quoted, it has also been criticized.155 One of thecriticisms involves the type of valuation methodology.It has been argued that valuation of ecosystem servicesshould assess the marginal value of ecosystem servicelosses; that is, valuation should measure the marginalor additional unit value of the opportunity cost to the


153 Costanza et al., “The Value of the World's Ecosystem Services and Natural Capital.”154 The Costanza et al. figures were converted to Cdn dollar equivalents by Mark Anielski and Sara Wilson (Anielski and Wilson, The Alberta GPI Accounts).155 One of the shortcomings of the Costanza et al. (1997) and Balmford et al. (2002) work is the lack of transparency in methodology and assumptions. While the

authors point to supplemental information that provides greater details of the studies they used in their synthesis workshop, we were unable to locate this material.Notwithstanding these criticisms, Costanza et al.'s work provides at least one set of proxies for a series of ecosystem service values.



~ p. 66~

economy of losing an additional area of intact ecosystemor losing ecosystem functionality. In 2002, Balmford et al. followed up Costanza et al.’s 1997 study byestimating the cost of habitat degradation to theworld’s economy ($250 billion each year).156 Usingthe opportunity costs compiled in their study, theauthors estimated that developing a network of globalnature reserves would ensure the delivery of goodsand services worth at least $400 trillion more eachyear than the goods and services from their convertedcounterparts. Their results suggest that the economicvalue of keeping ecosystems wild far outweighs thevalue of converting these areas to cropland, housing,or other human uses.The authors concluded that thebenefit-to-cost ratio is more than 100 to 1 in favourof conservation—a “strikingly good investment.”Thenet opportunity value of ecosystem services at themargin was based, in part, on the 1997 work ofCostanza et al. on gross ecosystem service benefits,adjusted to reflect net benefits at the margin of ecosystem service losses.157

But are there limits to placing a price on ecosystems?There is no question that in our present economy,where monetary valuation creates dollar metrics thatfacilitate trade-off decisions, estimating the economicvalues of natural capital and ecosystem services is useful.However, there are limits to the use of economic valu-ation. Ecological economist Tom Green argues that in a society truly committed to the goals of sustainability,valuation would be unnecessary (i.e., a sustainablescale of economy is determined vis-à-vis the capacityof ecosystems).158 Once this scale has been set, protectedareas, regulations, quotas, and other instrumentswould adjust the economy to its defined limits.

However, our society is not yet at this stage and,therefore, tools such as valuation are helpful toencourage the leap to a sustainable scale. Ecosystemvaluation is a technique that will help integrate theimportance of ecosystems into policy and land-usedecision-making. As of yet, ecosystems are not wellrepresented.

The premise of our study is that an accounting systemlike BEWAS is needed to inform and guide wise deci-sion-making. Ecosystem valuation and ecosystemaccounts are tools that can help communities, planners,economists, and other decision makers make the con-nection between society’s needs and the goods andservices that flow from ecosystems.These tools can alsocapture the attention of such people who are makingdecisions at the local level, in terms that are relative tothe status quo. However, at the same time, it is impor-tant to understand the limitations of ecosystem valua-tion. Economic valuation does not fully represent thevalues of ecosystems and, therefore, should not be theonly tool used in decision making. Ecological, cultural,and social values associated with the sustainability ofecosystems need to be considered in policy decisions,including the existence value of non-harvested wildlifespecies or the spiritual and aesthetic value of natural,undisturbed ecosystems to both indigenous and non-indigenous people. As a result, ecosystem accountsbased on comprehensive ecological inventories, dataanalysis, and spatial analysis, at all jurisdiction levels,are needed with input from ecologists, natural scientists, local representatives, and economists.

156 Andrew Balmford, Aaron Bruner, Philip Cooper, Robert Costanza, Stephen Farber, Rhys E. Green, Martin Jenkins, Paul Jefferiss,Valma Jessamy, Joah Madden, KatMunro, Norman Myers, Shahid Naeem, Jouni Paavola, Matthew Rayment, Sergio Rosendo, Joan Roughgarden, Kate Trumper, and R. Kerry Turner. “EconomicReasons for Conserving Wild Nature,” Science 297 (August 9, 2002): pp. 950-953.

157 Based on a personal conversation with Dr. Robert Costanza, September 6, 2002.158 As per email communication with Tom Green, May 17, 2005.

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recommendations

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6.

1. Given the absence of a complete inventory of thestocks and consumption of timber, minerals, carbon,wetlands, marine resources, wildlife, and fisheriesin the boreal region, we recommend that a com-prehensive inventory of the area be completed andmade publicly available. National, provincial, andlocal boreal region accounts should be developedincluding physical stock and flow accounts (inven-tory) of natural capital assets and ecosystem serv-ices.These accounts should include informationon the following: annual average growth rate oftimber; fires (in terms of both area and volumelost); insect infestation; carbon sequestration byforests and wetlands; fisheries; and annual waterflow rates in rivers and groundwater aquifers.Finally, these accounts should include an accountof the state of ecosystem services in order to trackor measure changes in ecosystem functionalityand their respective service values.

2. We recommend that the specific effects of each typeof human disturbance be identified, tracked, andmonitored to determine the change in economicvalue of the boreal region’s ecosystem services.

3. We recommend that economic values for ecosystemservices be further developed and adopted by alljurisdictions for resource and land-use planning,especially at the municipal and provincial levelswhere changes in land-use and resource planningare made.

4. Our analysis found that the total non-market valueof boreal ecosystem services is 2.5 times greaterthan the net market value of boreal natural capitalextraction.This result indicates that an economicargument exists that supports a significantexpansion of the network of protected areas in the boreal region, consistent with the BorealForest Conservation Framework’s vision for sustaining the integrity of the region. We recom-mend that a policy be developed to expand thenetwork of protected areas in the boreal regionthat would serve as an investment in the naturalcapital of the boreal region for the benefit of current and future generations of Canadians andglobal citizens.

5. We recommend that in order to ensure the optimum value of ecosystem services is recog-nized and conserved, resource management andland-use decisions need to account for impacts(i.e., costs and benefits) on ecosystem services and the overall state of the region’s naturalcapital.The Boreal Forest Conservation Framework’svision of conservation-based resource managementpractices should be implemented in order tominimize costs and maximize local ecologicalvalues.

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Appendix I: Towards an Accounting of Boreal Ecosystem Integrity


~ p. 69 ~

While our study provides a framework for meas-uring numerous natural capital attributes and

ecosystem functions, it does not provide an accountingof the integrity of the boreal as an ecosystem.To haveintegrity means to be whole or complete. So what isthe state of integrity of Canada’s vast boreal region?Moreover, what are the consequences of ecosystemswhose integrity has been damaged or degraded, wheresome of its ecological functions have been damageddue to human and industrial development?

The answers to these questions are complex. However,the ultimate goal of such boreal natural capital andecosystem service accounting is to assist decision mak-ers in making that kind of integrity diagnosis. Just likemeasuring the integrity or overall health of our bodies,assessing the integrity of Canada’s boreal region as anecosystem should be the ultimate next step forward.

Just as with human health, there is certainly value inhaving full integrity of ecosystems. On the other hand,where integrity has been lost, there is usually a costassociated with remediation of the damage, which inhindsight may be regrettably costly in terms ofreplacement infrastructure.

Just as we need a medical checkup to understand thestate of our health, so too do ecosystems need a check-up to understand and track their overall health andwell-being. Such an assessment should include esti-mates of the economic values of their numerous eco-logical functions, goods, and services and their esti-mated depreciation costs through full cost accounting.By providing an account of the physical condition ofthe boreal region and its ecosystem services, Canadianscan assess the potential regrettable and irreversible losses in ecological goods and services in land use and resource decisions.

But how should we account for ecological integrity?What measures or indicators can we use to diagnosethe well-being of a system as complex as a wetland? Is it possible to directly measure the physical state orcondition of the many ecosystem services we haveidentified?

As complicated as it is to measure human health orwell-being, measuring the integrity or well-being ofecosystems presents a greater challenge. First, naturalecosystems are poorly understood, and second, evenless information is compiled to track the extent ofeach system and the well-being of its components.One way to assess integrity is through ecological indi-cators, or proxies of integrity. For example, the diversi-ty of key species of plants, birds, and mammals in awetland, and their respective population, may tell ussomething about the overall health of the ecosystem.Indicators could be developed that measure the “con-dition” of all three dimensions of an ecosystem, akinto a 50-point health checkup.The ultimate goal is toassess the biological condition or ecological perform-ance of the ecosystem as a living and whole system.

Aquatic ecologist Dr. James Karr159 has developed whathe calls the Index for Biological Integrity (IBI) tomeasure the well-being, or integrity, of aquatic sys-tems (e.g., rivers, streams, and riparian zones).TheIBI measures biological or ecological integrity by the

diversity, number, and overall health of species in anaquatic ecosystem. Karr has shown that ecologicalintegrity, as measured by the IBI, declines with increas-ing human disturbance. Figure 5 illustrates this rela-tionship. Karr describes biological integrity as the con-dition of a place that has its evolutionary legacy—itsparts (e.g., species) and processes (e.g., nutrientcycles)—intact. Degradation of the biological condi-tion beyond a threshold (in the vicinity of T, an

159 J. Karr. “Health, Integrity, and Biological Assessment:The Importance of Measuring Whole Things,” in Ecological Integrity: Integrating Environment, Conservation and Health, ed.D. Pimentel, L. Westra, and R. Noss (Washington, DC: Island Press, 2000), pp. 209-226.



~ p. 70~

ecological “tipping point”) is where an ecosystembecomes unhealthy because its functionality hasbecome compromised or unsustainable. Karr notes that T is a tipping point beyond which neither the nat-ural biota nor human activity can be sustained in thatplace, though T is not easily defined or measurableover short time periods. Karr’s model considers theideal, or “pristine,” biological condition as a biota that is a balanced, integrated, adaptive system with afull range of elements (i.e., genes, species, and assem-blages) and processes (i.e., mutation, demography,biotic interactions, nutrient and energy dynamics, andmetapopulation processes) that are expected in areaswith minimal human influence.

What is useful about Karr’s IBI is that it looks at therelationship between human pressures on ecosystemsand ecosystem integrity by examining the well-being

of non-human species, as a rough proxy, withoutdirectly measuring ecosystem functions. One of thechallenges in large terrestrial ecosystems like the boreal region is taking inventory of the complexity of species that make up the various types of ecosys-tems from forests to wetlands. Some scientists, includ-ing University of Alberta’s Dr. Stan Boutin, have justbegun to work on creating similar IBI estimates forterrestrial boreal ecosystems. Boutin and other scien-tists are examining the utility of examining the state ofkey indicator species of insects, birds, and other mam-mals as indicators of ecological integrity. Because thiswork is in its infancy, it will be several years before auseful accounting of boreal integrity using species andindices like the IBI will be available to decision makers.The bottom line is that we lack the species inventoryto provide a useful integrity analysis of the “state” ofboreal ecological integrity.

Figure 5: Biological Integrity Continuum

Source: Karr, J. 200. Health, Integrity, and Biological Assessment:The Importance of Measuring Whole Things. Pp. 209-226 in D. Pimentel, L.Westra and R. Noss. eds., Ecological Integrity: Integrating Environment, Conservation and Health. Island Press, Washington. DC.

None SevereHUMAN DISTURBANCE

BIOL

OGIC

AL C

ONDI

TION

Noth

ing

Aliv

ePr

istin

e

T

Healthy =sustainable

Unhealthy =unsustainable

Biological integrity


Despite this shortcoming, Karr’s IBI framework doesprovide another possible methodological approach toassessing the state of ecosystem integrity. Namely, thetrends in human disturbance pressures (e.g., resourceextraction, ecosystem fragmentation from linear distur-bance, pollution, and emissions) can be tracked andmapped to show where ecological integrity is underthe greatest threat.

The Pressure-State-Response model provides a usefulaccounting framework for assessing ecological integrity(see Figure 6). Using this framework, it is possible toaccount for the various kinds of human and industrialpressures (i.e., the ecological footprint) that humanenterprise is placing on ecosystems.These pressuresinclude industrial development, community develop-ment, and other human pressures on natural systems.We know that these pressures, including natural distur-bance pressures (e.g., fire), affect the state or conditionof the wholeness or integrity of an ecosystem. However,natural disturbance is part of the natural ecosystem andcan be seen as one of nature’s services; so it should notnecessarily be seen as a negative occurrence or regret-table pressure. In fact, such an occurrence is part of therenewal of an ecosystem and a necessary disturbance for the regeneration of some boreal species.

How we respond to a change in the state of an ecosys-tem constitutes the human response in the form of

changes to policies either regarding land use orresource management.

It may be sufficient, even in the absence of completeinformation of the state of ecological integrity orknowledge of the proximity to an ecological “tippingpoint,” to account for the scale and degree of industri-al development as a basis of applying the precautionaryprinciple in order to avoid the potential irreversibleloss or degradation of ecosystems and their functions.

Karr argues that at the very least the observed biota ofminimally disturbed sites provide benchmarks or astandard against which other sites of similar biologicalcharacteristics under varying degrees of human distur-bance, impacts, or pressures can be compared.160 Thiswould require a common and routine biologicalassessment of the condition or biota of a continuum of sites to provide information about whether we aregoing in the right direction of ecosystem health andsustainability and at what rate (relative to a benchmarkof “pristine” or undisturbed conditions).

Karr says the challenge is that ecosystems are not static;they are in a state of constant flux responding to vari-ous influencers that affect their health or integrity.Ecosystems are fundamentally resilient but tend toexhibit random or chaotic bifurcations over time.


~ p. 71 ~

Figure 6: Pressure-State-Response Model

160 Ibid.

Pressure State Response



~ p. 72~

The ecosystem values presented in our study assumethat boreal ecosystems are fully functional. In otherwords, benefit values are applied to the total ecosystemarea and due to a lack of data, no adjustments aremade for the effects of land use.Therefore, it is impor-tant to also develop tools that can evaluate the integrityor functional abilities of ecosystems across Canada,including the boreal region.

Maintaining and restoring, where necessary, the integri-ty or health of boreal ecosystems—with their multitudeof life-support functions—is critical to the sustainedhealth of our environment and the economy.The globalboreal region represents 25 percent of the world’sremaining intact forests, and the Canadian boreal regionis one of the last places left on Earth that is sufficientlyintact to maintain fully functioning ecosystems.

The following analysis compiles and illustrates some of the development currently placing pressures onCanada’s boreal ecosystems. Spatial analysis is used as a tool to begin developing an account of the pressureson the boreal region’s integrity, and this account canbe expanded as more data become available andtracked over time.

1. Fragmentation Due to HumanDisturbance in the Boreal Region

Industrial development pressure in the boreal regionhas resulted in landscape fragmentation due to thecombined impact of forestry, oil and gas, and miningactivities and other linear disturbances such as roads,well sites, and pipelines.The impacts of industrialdevelopment (i.e., forestry, mining, and oil and gas,and roads) in terms of fragmentation were estimatedusing spatial analysis. A map of the “human footprint”on the boreal region, including cutblocks, seismiclines, well sites, pipelines, and roads, shows where the greatest industrial development pressures currentlyexist. Such pressures may affect the current conditionsand future vitality of boreal ecosystems and the services they provide (see Figure 7).

The detailed results of the spatial analysis of fragmen-tation in the boreal region are presented in Table 25.The total boreal area that has been fragmented byindustrial and linear disturbance is 19.6 percentaccording to the draft analysis undertaken by GlobalForest Watch Canada.The ecozone with the greatestproportion of fragmented area is the Boreal Plains ecozone (46 percent), and the ecozone least fragment-ed is the Hudson Plains ecozone (2 percent).

2. Natural Disturbance in the Boreal Region

In addition to timber harvest, other data that affect the stock of forest resources and the integrity of forestecosystems were considered, including the extent andpotential impacts of fire and insects. Only rough dataon the estimated area of forests burned by wildfireswere available.Thus, exact information on the volumeof timber burned as a result of fire was not available.However, the occurrence of fire in the boreal regionhas increased over the past 30 years. Based on the average area burned between 1980 and 1997, an esti-mated 2.5 million hectares of forest burns each year,affecting 236.2 million cubic metres of timber peryear. There were no data on the area of forest affectedby insect infestations or the area of forest that is effec-tively dead due to infestations.

In terms of interpreting a natural disturbance, anapproach must be taken to determine whether itsimpact is negative or part of the ecosystem’s distur-bance regime and therefore an essential service untoitself. Forest ecosystems in the boreal region aredependent on fire for regeneration.Therefore, toolssuch as the Range of Natural Variability (RONV)should be used to assess the impact of natural distur-bances. For example, if the area burned was within theRONV for a specified ecosystem, then the disturbancewould not be assessed as having a negative impact onecosystem integrity. However, when the area disturbedby fire exceeds the RONV, the disturbance would beconsidered outside the natural regime. Presently, the

Appendix II: Pressures on Canada’s Boreal Ecosystems



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Figure 7: Boreal Ecosystem Fragmentation from Forestry, Mining, Oil and Gas,and Other Industrial Linear Disturbances

Sources: P. Lee, D. Akesenov, L. Laestadius, R. Noguerón, and W. Smith. Canada’s Large Intact Forest Landscapes (Edmonton: Global Forest WatchCanada, 2003),retrieved March 28, 2005 from the Global Forest Watch Canada website http://www.globalforestwatch.ca.The informa-tion and maps are based on a DRAFT 2005 dataset prepared by Global Forest Watch Canada project Canada’s Forest Landscape Fragments, whichis mapping forest landscape fragments using a modified version of methodologies developed by Global Forest Watch Russia (seehttp://www.globalforestwatch.org/english/russia/maps.htm) to map large intact forest landscapes in Canada, and by the ConservationBiology Institute to map unfragmented and intact forest landscapes of Alaska (still in draft form).This analysis was performed on a draftdataset developed by Global Forest Watch Canada in 2005.The dataset is under wide review by industry, governments, environmentalgroups, and academics. It will likely undergo changes for publication.Therefore, this present analysis should be considered as prelimi-nary only.



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frequency of fire has been increasing and is predictedto continue due to warmer, drier conditions broughton by climate change.

3. Mining, and Oil and GasIndustrial Footprint in the Boreal Region

Mining, and oil and gas extraction in the boreal regionhas an estimated industrial footprint of 46.3 millionhectares, of which the majority is related to oil and gaswell sites and pipelines (46.0 million hectares).The“industrial footprint” of these sectors is portrayed inFigure 8, in which the spatial area affected by oil andgas activity is illustrated in light blue.161

The long-term impact of mining coupled with theslow recovery rate of the boreal ecosystem make min-ing of great concern, particularly considering its preva-lence. In terms of the potential ecological impacts ofmining activity, mining is often the frontier industrythat introduces roads, power developments, and infra-structure into the remote or semi-remote areas.

The significant impact of oil and gas development(i.e., currently, its industrial footprint is roughly 8 per-cent of the total 584 million hectare area of the borealregion) on ecological integrity and ecosystem servicesare still largely unknown. For example, the disruptionto ecological function and the services provided bypeatlands, wetlands, and watersheds due to ecosystem

Source: Based on analysis completed by Global Forest Watch Canada.

a This figure represents the average percentage of the total boreal forest region which has been fragmented by linear and industrial dis-turbance or development.

161 The mining industrial footprint area of 194,853 hectares is derived by GFWC by using the federal government mines 1997 dataset; there were 104 mines in theBoreal/Taiga ecozones (5 in Taiga Shield, 3 in Boreal Cordillera, and 96 in Boreal Shield). GFWC applied a 10 kilometre buffer to accommodate an ecological zoneof influence around each of these mines.The total ecological footprint of these 104 mines is 194,853 hectares. GFWC also estimated the oil and gas industryindustrial footprint at 46,060,000 hectares based on well site and pipeline datasets that are used as “proxy” datasets for the land surface footprint of the PNG(petroleum and natural gas) sector. Other relevant datasets were not available, including seismic lines, most pipelines, and associated roads and power lines.Tocompensate for the surface disturbance caused by the missing data, a generalized 2-kilometre buffer was applied to the well site and pipeline datasets. GFWCapplied the following methods: (a) well sites and pipelines were clipped for the Boreal/Taiga ecozones; (b) all well site points and pipelines were buffered by 2kilometres (for a total of 4 kilometres); (c) all well site and pipeline polygons were merged and boundaries dissolved to create a single polygon; and (d) total areacovered by the single polygon was derived.The source of data included (a) source of well sites database: a commercially available well sites dataset consisting of~465,000 well sites for all of Canada, from 1901 to 2003-it is available for purchase from IHS Energy, http://www.ihsenergy.com/; and (b) source of pipelinesdatabase: Geogratis, vmap_0_r4-it is available for download at http://geogratis.cgdi.gc.ca/download/vmap_zero_r4/canada/.

Table 25: Area and Percentage of Fragmentation in Canada’s Boreal Region

Ecozone Total Area Fragmented Percentage of Ecozone(hectares) Area (hectares) Fragmented

Boreal Cordillera 40,727,439 2,664,826 6.5

Boreal Plains 71,111,937 32,684,809 46.0

Boreal Shield 188,588,128 47,327,116 25.1

Hudson Plains 27,555,152 517,255 1.9

Taiga Cordillera 20,491,787 423,651 2.1

Taiga Plains 57,642,619 7,690,765 13.3

Taiga Shield 68,912,420 1,612,773 2.3

Total 475,029,482 92,921,195 19.6a



~ p. 75 ~

Figure 8: Oil and Gas Industrial Footprint Area Coveragein Canada’s Boreal Region, June 2003

Source: Global Forest Watch Canada. 2005



~ p. 76~

fragmentation is not currently measured nor moni-tored.Therefore, the potential loss of the total eco-nomic values of boreal ecosystem services due to oil and gas activity cannot be readily measured at this time. Without an assessment of the relationshipbetween industrial activity and ecosystem integrity and the functionality of ecosystem services, it will be difficult to assess, at the margin of change, the true effect on both ecosystem integrity and the truevalue of ecosystem services being lost or depreciated.

4. Fragmentation Levels ofEndangered Species’ HabitatRanges in the Boreal Region

One example of the effects of fragmentation can beillustrated by interpreting the degree of habitat affect-ed for specific species. Here, we have analyzed the

fragmentation levels across the habitat range of endan-gered species in the boreal region.The habitat rangesof selected endangered species were clipped for theBoreal and Taiga ecozones (i.e., boreal region) usingspatial analysis.162 Each species’ total habitat range areaand total fragmented habitat range area within theboreal region were calculated (see Table 26).The per-cent of fragmented habitat range is greatest for thesouthern mountains woodland caribou (57.7 percent),followed by the wood bison range (39.6 percent).Theleast fragmented habitat range is that of the wolverine(eastern and western populations).

The degree of fragmentation of a species habitat is agood indicator for the condition of a species.163 Forexample, species such as woodland caribou (Rangifertarandus caribou) and walleye (Stizostedion vitreum) havebeen shown to be adversely affected by linear


Source: Estimates made by Global Forest Watch Canada based on Environment Canada data for 2003.

162 Endangered species' ranges spatial files obtained from Environment Canada (2003 data) by Global Forest Watch Canada for the purposes of this study.163 The work by M. Soule and J. Terborgh. Continental Conservation: Scientific Foundations of Regional Reserve Networks (Washington, DC: Island Press, 1999) on the issue of ecosystem connectivi-

ty notes that loss and fragmentation of habitat is the greatest risk to biodiversity.The authors provide a good discussion on the importance of maintaining ecosystem integrity,large, contiguous “megareserves” for regional conservation in core areas, corridors, networks, and buffer zones, as well as avoiding the deleterious impacts of fragmentation dueto linear disturbance.

Table 26: Fragmentation of Endangered Species’ Habitat Ranges in the Boreal Region

Species Total Area of Species Total Fragmented Percentage ofHabitat Range in Area within Habitat Range

Boreal/Taiga Ecozones Habitat Range Fragmented(hectares) (hectares)

Whooping crane 249,333 13,819 5.5

Woodland caribou 890,520 514,078 57.7(southern mountains)

Woodland caribou (boreal) 178,076,964 22,614,635 12.7

Wood bison (boreal) 24,360,290 9,644,986 39.6

Wolverine (western population) 262,409,468 20,132,602 7.7

Wolverine (eastern population) 108,004,117 5,600,927 5.2

Grizzly bear 210,244,345 27,394,947 13.0


~ p. 77 ~

Figure 9: Boreal Fragmentation Map (Red Polygons) within Boreal WoodlandCaribou Habitat (Green Line)

Source: Spatial analysis completed by Global Forest Watch Canada, 2005



~ p. 78~

disturbances and increased human access.164 In the caseof endangered species, fragmentation is an indicator ofthe species future viability. As fragmentation and lossof habitat increase, the viability of a species declines.Figure 9 shows the fragmented area across the borealregion with the overlay of woodland caribou habitat.The high degree of fragmentation in the western partof its habitat range is clearly illustrated. Unfortunately,there were no other data sources for other wildlifespecies or habitat for the boreal region. Future BorealEcosystem Wealth Accounting Systems (BEWAS) shouldinclude a more comprehensive analysis of fish andwildlife populations and habitat inventory.

5. Future Development of BorealIntegrity Analysis

With more comprehensive data, an overlay of severalhuman and industrial development datasets shouldeventually provide an ecosystem spatial analysis oraccount of the cumulative impacts on boreal ecosys-tem health and integrity. An interpretation of our spa-tial analysis in terms of the status of ecological integri-ty and the effects on ecological function and serviceswas not possible at this stage. However, even in theabsence of precise measures of ecosystem integrity, theabove fragmentation analysis reveals the spatial impactof the current landscape disturbance and fragmentation due to cutblocks, seismic lines,well sites, pipelines, and roads on boreal ecosystems.

Ideally, a robust BEWAS will track and report on thechanges in the condition of Canada’s boreal regionover time. A national commitment to more compre-hensive natural capital inventories is required in orderto complete a BEWAS.

6. ConclusionThe highlights of our spatial analysis of pressures onCanada’s boreal region include:

• Industrial development pressure in the borealregion has resulted in approximately 20 percent of landscape fragmentation (25 percent of forestland), due to the combined impact of forestry, oil,gas, and mining activities and other linear distur-bance such as roads, well sites, and pipelines.

• Mining, and oil and gas extraction in the borealregion has an estimated industrial footprint of46.3 million hectares, of which the majority isrelated to oil and gas well sites and pipelines.

• The fragmented habitat range for the southernmountains woodland caribou is 57.7 percent,and for wood bison, it is 39.6 percent. Bothspecies are endangered species in the borealregion.

164 R. R. Schneider, J. B. Stelfox, S. Boutin, and S. Wasel. 2002. “The Management of Cumulative Impacts of Land Uses in the Western Canadian Sedimentary Basin: ACase Study” (working paper, Sustainable Forest Management Network, 2002); S. J. Dyer, J. P. O'Neill, S. M. Wasel, and S. Boutin. “Avoidance of IndustrialDevelopment by Woodland Caribou,” Journal of Wildlife Management 65 (2001): pp. 531-542; and J. R. Post and M. Sullivan. “Canada's Recreational Fisheries:TheInvisible Collapse?” Fisheries 27 (2002): pp. 6-17.


Counting Canada’s Natural Capital:


About the Canadian Boreal Initiative

The Canadian Boreal Initiative was created in response to both the opportunities andthreats facing Canada’s Boreal region.

Based in Ottawa, the CBI brings together a wide range of conservation organizations,First Nations, industry leaders and others to create new solutions for Boreal conservationand sustainable development. It supports scientific research to advance thinking onconservation-based planning for the Boreal region, and acts as a catalyst by supporting a variety ofon-the-ground efforts across the Boreal by conservation groups, First Nations and others.

In 2003 the CBI convened the Boreal Leadership Council, an extraordinary group of conservationorganizations, First Nations and resource companies. In concert with the members of the council,the CBI created and launched the Boreal Forest Conservation Framework – a vision for the protectionand sustainable development of Canada’s entire Boreal ecosystem.

www.borealcanada.ca

About the Pembina Institute

The Pembina Institute is an independent, not-for-profit environmentalpolicy research and education organization. Founded in Drayton Valley,Alberta, the Pembina Institute has a multidisciplinary staff of morethan thirty, with offices in Drayton Valley, Calgary, Edmonton, Vancouver, Ottawa and Toronto.

The Pembina Institute’s major policy research and education programs are in the areas of sustainableenergy, climate change, environmental governance, ecological fiscal reform, sustainability indicators,and the environmental impacts of the energy industry.

www.pembina.org

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Canadian Boreal Initiative249 McLeod StreetOttawa, ON K2P 1A1Tel: (613) 230-4739www.borealcanada.ca

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